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 various reasons you may wish to set up 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 reasons, in this blog we 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 that we have designed specifically for companies that start with the intention of staying dormant.
We provide a simple online incorporation procedure, the option of many additional company services, and expert support every step of the way. All incorporations are then submitted to, and processed by, Companies House, with most applications approved on the same day, usually within 3 to 6 working hours.
You can also use the online or postal services available from Companies House directly. However, their application process is a little more complex, and their services are very limited.
So, the process we are about to outline is based on our simple 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, so you must choose a distinctive company name and check that it is available to register.
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 that is available.
Step 2. Select a company formation package
We offer several company formation packages to suit a variety of needs, but we recommend using our Reserve a Company Name Package. This package is designed exclusively for those who wish to form a dormant company, and it provides everything you need to set up and maintain a dormant company in the UK, including:
- A London registered office and director’s service address
- A full set of electronic company incorporation documents
- A set of statutory company registers with the first entries already completed
- Confirmation Statement Service
- Dormant Company Accounts Service
- A pro forma letter to HMRC providing notification of dormant company status; and
- Free support by telephone, email and live chat throughout the life of your company
Step 3: Checkout and pay
Once you have chosen your company name and formation package, you are ready to proceed to the checkout. You will have the option to add some extras to your basket, such as our Guaranteed Same-Day Service, Pre-Submission Review, and Printed Company Documents.
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
It’s now 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 help, you can call or chat online with our friendly UK-based team.
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 or SIC codes. These codes tell the world what business activities your company is going to be carrying out.
Companies that are going to be dormant can simply select the SIC code 99999. This is the dedicated SIC code reporting publicly that the company shall be dormant. To locate this code, select ‘All’ from the drop-down menu on the form and then scroll to the very bottom.
In this section, you will enter the details of all the company’s directors, secretaries, shareholders, and persons with significant control (also known as PSCs).
You’ll need to enter the details of all directors. As a minimum, you’ll need one director, although generally there’s no limit to the number you can appoint.
Following this, you will need to provide details of the shares being issued, namely how many, who will be receiving them, what their minimum value will be, and the rights they provide to said shareholders.
At the very least, you need a minimum of one shareholder with at least one share.
You will then be asked to specify if there are any people with significant control over the company. In most cases, the shareholders are also the PSCs. This is an important step to get correct, so as with the rest of the form, guidance is provided on our website to help you complete this accurately.
Review your application
All that’s left to do now is review the information that you have entered on the form and press ‘Submit’. We will then forward your application to Companies House for processing.
Once this is approved, Companies House will issue a Certificate of Incorporation, confirming that your company has now been registered. If you purchased our Reserve a Company Name Package, we’ll also send you an email containing digital copies of your new company formation documents, your company registers, and a dormant company notification letter template for HMRC.
Step 5. Tell HMRC that your company is dormant
This isn’t an incorporation step, as 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 and so will be expecting you to file Company Tax Returns and make any relevant Corporation Tax payments. If a company fails to do so, they could find themselves penalised.
So, to avoid having to submit those Company Tax Returns as well as avoid the company being penalised, the company should inform HMRC that the 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, within a couple weeks of your company being formed. If you purchase our Reserve a Company Name Package, we’ll provide you with a pro forma letter template for you to fill out and send directly to HMRC.
Maintaining your dormant company status
Firstly, you’ll need to make sure your company continues not to carry on any type of business. This includes things like buying or selling goods or receiving any income. If you do, then your company needs to let HMRC know that it has begun trading and will therefore need 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, because you will still have 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); and
- reporting any changes that occur, for example 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 to the ICO on their 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 that companies that are dormant for Companies House’s purposes (that is, they have “no significant accounting transactions” throughout the entirety of the financial year) can normally submit what are called dormant company accounts.
These are simplified forms of accounts, providing very basic information about the company’s share capital and not much else. Submitting dormant company accounts doesn’t ‘make your company’ dormant so-to-speak, but it’s a filing that can be made by eligible companies to fulfil their annual accounts filings.
If you want 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 about our Reserve a Company Name Package, or if you need help to set up your dormant company, please call our Customer Service Team on 020 3897 2233, or message them on live chat.