Daily Junction.mobi portalBusiness · July 29, 2023 · Marcus Vale · 6 min
A dormant company is one that is not trading and has no significant accounting transactions. This guide explains what dormant means to Companies House and HMRC, why people keep one, and the filings still required.
Not every limited company is busy trading. Some sit quietly on the register for months or years, doing nothing at all — and that is a perfectly legitimate state called being dormant. A dormant company has been set up but is not active: no sales, no purchases, no staff, no real movement of money. People keep them for sensible reasons, from protecting a brand name to pausing a business through a quiet spell. But "dormant" does not mean "forgotten" — there are still filings to make. This guide explains what dormant means, why companies use the status, and the obligations that remain. This is general information, not legal or tax advice.
A dormant company is a limited company that is not trading and has had no significant accounting transactions during a financial year. The phrase significant accounting transaction is the key. Broadly, it means any entry that would normally appear in the company's accounts — money in or out for trading, wages, bank interest, and so on. If none of that has happened, the company is dormant.
The company still legally exists. It remains on the Companies House register, keeps its name and registration number, and retains its directors. It is simply inactive — paused rather than closed. This makes it quite different from striking a company off or formally winding it up, which removes it from the register altogether.
A handful of transactions are permitted without ending dormancy. The most common is the fee paid to Companies House for filing the confirmation statement. Penalties for late filing are also allowed. Almost anything else — even a single business sale or a salary payment — will usually make the company active and end its dormant status.
A frequent source of confusion is that dormant means slightly different things to the two bodies a company answers to. You may need to satisfy both.
| Body | What dormant broadly means |
|---|---|
| Companies House | No significant accounting transactions in the financial year (a few permitted items aside) |
| HMRC | Not active for Corporation Tax — not carrying on business activity or receiving income |
The two usually align, but not always. A company can be dormant for Companies House purposes while HMRC still expects to hear from it, or vice versa. The safest approach is to tell HMRC directly that the company is dormant for Corporation Tax, rather than assuming they know. If HMRC agrees, it can stop expecting a company tax return — but that confirmation has to be obtained, not presumed.
Dormant is a status you maintain, not one you can drift into and ignore. The register still expects to hear from you each year, even if all you are saying is "nothing happened."
There are several genuinely useful reasons to hold a company in dormancy rather than closing it:
Keeping a company dormant is far cheaper than running an active one, but it is not free of effort. Before incorporating purely to reserve a name, it is worth weighing whether you actually need a company yet — sometimes operating as a sole trader first, then incorporating when you launch, is simpler. Our guide to registering a UK company covers the setup either way.
This is the part that catches people out: a dormant company still has annual obligations. Being inactive does not switch them off. Each year you must generally file:
Dormant accounts are much simpler than full trading accounts. For many small dormant companies they consist of little more than a balance sheet showing minimal figures, with no profit and loss account required. This is one of the real conveniences of dormancy — the accounting burden is light, but it does not disappear entirely.
For HMRC, if the company is accepted as dormant for Corporation Tax, you may not have to file a company tax return for that period. But you must keep the status under review: the moment the company starts trading again, the clock restarts and you must tell HMRC, typically within three months of becoming active.
Failing to file the confirmation statement or accounts, even for a dormant company, can lead to the same consequences as for an active one — penalties and, ultimately, being struck off the register. Dormant is not a free pass on compliance.
To make an active company dormant, you broadly need to:
Watch out for small, easily forgotten transactions — a bank account paying a few pence of interest, or a standing order still running — because these can quietly end dormancy. Many directors move a dormant company to an account that charges and pays nothing.
To restart (wake up) a dormant company, you reverse the process: begin trading, tell HMRC the company is active again within the deadline, register for any taxes that apply such as VAT or PAYE if relevant, and resume filing full accounts. Restarting is straightforward precisely because the company never ceased to exist.
A dormant company is a limited company that is not trading and has had no significant accounting transactions in a financial year. It stays on the register, keeps its name, and can be kept dormant cheaply — which is why people use the status to protect a brand, hold an asset, or pause a business. But dormancy is a maintained status, not a free ride: you must still file a confirmation statement and dormant accounts each year, and confirm dormant status with HMRC for Corporation Tax. Keep an eye out for stray transactions that could end dormancy, and treat Companies House and GOV.UK as the authoritative sources.
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