How to set up a dormant company

To set up a dormant company, you need to follow the standard process to set up a limited company and then tell HMRC that your new company is dormant for Corporation Tax purposes. This simple guide takes you through the steps required to register and maintain a dormant company in the UK.

Setting up a dormant company in the UK

There are several reasons you may wish to establish a dormant company. It might be to reserve a company name so that no one else can take it. Or, perhaps you set up a company with an intention to trade, but that plan was put on the back burner for a later date.

Regardless of your reason, this blog post will take you through the steps required to incorporate a UK company and then make it dormant.

Now, online incorporation is naturally the easiest way to register any type of company. As the leading company formation agent in the UK, 1st Formations offers a range of affordable packages, including one specifically designed for companies that intend to remain dormant from the outset.

We offer a straightforward online incorporation process, a range of additional company services, and expert support throughout the entire process. All incorporations are then submitted to Companies House, with most applications processed and approved on the same day – usually within 24 hours.

• What is a dormant company?

You can also use the online or postal services offered directly by Companies House. However, their application process is somewhat more complex, and their services are quite limited.

The process we are about to outline is based on our straightforward online company formation process.

Step 1. Choose a company name

Selecting a company name is the first step in the company formation process. It is not possible to register a company without one, even if it’s going to be dormant. You must choose a distinctive company name and check that it is available to register.

• Guidelines for creating a limited company name

To do so, enter your proposed name in the company name search tool on the 1st Formations homepage. If it is available, you can go ahead and use it. If it is not, you will need to alter it or enter a different name until you find one that is available.

Step 2. Select a company formation package

We offer several company formation packages to suit a variety of needs, but there is no package designed exclusively for those who wish to form a dormant company. However, we would recommend our Privacy or All Inclusive Package, which includes services that are useful for setting up and maintaining a dormant company in the UK, such as:

• London registered office and director’s service address
• Full set of electronic company incorporation documents
• Set of statutory company registers, with the first entries already completed
• Confirmation Statement Service
• Free support by telephone, email, and live chat throughout the life of your company

Step 3: Check out and pay

Once you have chosen your company name and selected a formation package, you are ready to proceed to checkout. You will have the option to add some extras to your basket, such as our Guaranteed Same-Day Service and Pre-Submission Review.

After your payment has been processed, you will receive a confirmation email, login details for your Online Company Manager (where you can manage your new company after incorporation), and a receipted invoice.

Step 4: Enter your company details

Now is the time to enter your new company details on our online application form. But don’t worry – this step only takes about 5 minutes. The form is easy to navigate and understand, with explanations provided at every stage.

If you are unsure about anything or need assistance, you can contact our friendly UK-based team by phone or online chat. The information you will be asked to enter on the form is as follows:

Principal business activity

First of all, you need to specify the main business activity (or activities) of your new company by entering one or more Standard Industrial Classification (SIC) codes. These codes indicate to the world the business activities your company will be undertaking.

Companies that will be dormant can simply select the SIC code 99999. This code is used exclusively by dormant companies. To locate it, select ‘All’ from the drop-down menu on the form and then scroll to the very bottom.

Appointments

In this section, you will enter the details of every company director, secretary, shareholder, and person with significant control (also known as a PSC).

As a minimum, you need one director and one shareholder. Generally, there’s no limit to the number of directors and shareholders a company has at any one time.

Following this, you will need to provide details of the shares being issued, namely the number, the recipients, the minimum value, and the rights they confer on the shareholders. At the very least, you need a minimum of one share for every shareholder in the company.

• A guide to company shares
• How many shares should I issue when forming a company?

You will then be asked to specify if there are any people with significant control in the company. In most cases, the shareholders are also the PSCs. This is an important step to get it correct. So, as with the rest of the form, guidance is provided on our website to help you understand the requirements and complete the form accurately.

Review your application

All that’s left to do now is review the information you’ve entered on the form and press ‘Submit’. We will then forward your application to Companies House for processing.

Once it’s approved, Companies House will issue a Certificate of Incorporation to confirm that your company has now been registered.

Step 5. Tell HMRC that your company is dormant

This isn’t an incorporation step. It’s something you need to do shortly after the company has been formed, but it’s no less important.

Unless advised otherwise, HMRC will assume that your company is trading, so they will expect you to file Company Tax Returns to report your business income, expenditure, and taxable profits. If a company fails to file a tax return when requested to do so, it could face penalties.

So, to avoid having to submit a Company Tax Return (or being penalised for not doing so), you should inform HMRC that your company is dormant for Corporation Tax purposes within 3 months of being formed.

The easiest way to do so is to send HMRC a letter confirming the company’s dormancy. This letter will need to include the company’s name and registration number, date of incorporation, and 10-digit Unique Taxpayer Reference or UTR.

The UTR will be mailed to your registered office by HMRC automatically, usually within a couple of weeks of your company being formed.

Maintaining your dormant company status

Firstly, you’ll need to ensure your company remains dormant – i.e., it does not conduct any type of business at any time. This includes activities such as buying or selling goods and receiving any income. If you do, then your company must tell HMRC that it has started trading. You will then be required to submit Company Tax Returns and pay Corporation Tax as normal.

Secondly, it’s a common myth that a dormant company doesn’t need to make any submissions to Companies House. You will, in fact, be required to fulfil certain reporting obligations, including:

• submitting an annual confirmation statement
• filing dormant company accounts each year (we’ll come onto this in a moment)
• reporting any changes that occur – e.g. to the registered office, director’s name or address, share capital, or PSCs

Failure to do so could leave you in some hot water. Penalties include your company being struck off by Companies House, your company could be fined and the directors could even be prosecuted.

In addition to the filing obligations at Companies House, all the normal company rules apply. For example, the need to maintain the company’s statutory registers (like the register of members) on an ongoing basis, as well as maintaining a registered office address in the jurisdiction of incorporation.

Finally, you may sometimes need to confirm your dormancy status with other government bodies. For example, the Information Commissioner’s Officer (also known as the ICO) may sometimes contact you if they believe your company is trading (and therefore may need to register for data protection purposes and pay the data protection fee). In this case, you just need to confirm on the ICO’s website that your company is dormant.

Dormant company accounts

Just because your company is dormant doesn’t mean the company’s requirement to submit accounts is removed.

But, the good news is, companies that are dormant for Companies House’s purposes (i.e. they have “no significant accounting transactions” throughout the entirety of the financial year) can normally submit dormant company accounts.

This is a simplified form of accounts that provides very basic information about the company’s share capital (that’s about it). If you’d like to find out more about submitting dormant company accounts, we published a video on this very topic: What are dormant company accounts?

Thanks for reading

If you have any questions or need help setting up a dormant company, please call our Customer Service Team on 020 3897 2233 or message them via live chat.