In the context of limited company formation, the term ‘active’ has different meanings for Companies House and HMRC. When a new company is incorporated at Companies House, it immediately becomes ‘active’ in the sense that it comes into existence as a separate legal entity and is ready to start trading at the owner’s earliest convenience.
A registered company that is not trading is viewed by Companies House as dormant for the purpose of submitting annual accounts. So, it is entirely possible for a company to be considered by Companies House as both active and dormant at the same time.
This is not the case with HMRC. An active company is a registered limited company that is trading. When a company engages in any type of business activity or receives any kind of income, HMRC considers it to be active for corporation tax purposes. This means the business is:
- Registered with HMRC for corporation tax.
- Pays corporation tax once per year on all taxable income.
- Submits a Company Tax Return and full statutory accounts to HMRC every year.
It is worth getting to grips with these different meanings because a lot of guidance published by Companies House and HMRC includes this terminology.
Active company requirements for Companies House
Companies House requires all active companies (those that have been incorporated) to file annual confirmation statements (previously annual returns) and annual accounts every year, even when they are not trading.
An annual confirmation statement (form CS01) is a document that a company needs to submit at least once a year to confirm the company’s registered details at a certain date. The information it confirms includes:
- Company name
- registered office address
- SAIL address
- Directors’ details
- Company secretary details
- Shareholders’ details
- Share capital
- SIC codes
- Location of statutory records and registers.
- People with significant control
Annual accounts are used to report the financial activity of a company during its most recent financial year. If it has not been trading and not had any ‘significant accounting transactions’ during its most recent accounting period, the submission of annual accounts will alert Companies House to that fact.
Click here to see detailed guidance on how to complete and file annual accounts.
Companies that are inactive for corporation tax purposes should file dormant accounts with Companies House.
Active company requirements for HMRC
A company that is ‘active’ for corporation tax must register online with HMRC for corporation tax purposes within three months of engaging in any of the following taxable activities:
- Buying or selling goods.
- Buying or selling services.
- Managing investments.
- Issuing or receiving dividend payments.
- Employing staff and operating payroll (this includes paying a director’s salary).
- Leasing or buying property or land.
- Earning interest.
- Spending or receiving any money through a business bank account.
After registering for corporation tax, HMRC will provide deadlines for paying your tax bill and filing a tax return and annual accounts. You may also need or wish to register for VAT.
If your company is not trading or receiving any form of income, you must contact HMRC’s corporation tax office at your earliest convenience to report your dormant trading status.