There is no single definition of a dormant company. There are two, they are set by different bodies, they test different things, and a company can be dormant for one and not the other at exactly the same time.
That is not a technicality. It is the reason directors get late filing penalties on companies they were certain had stopped trading years ago.
Here is what each definition actually says, where they diverge, and what you still have to do either way.
The two definitions, in one line each
Companies House: your company is dormant if it has had no significant accounting transactions during the financial year. A significant accounting transaction is one the company should enter in its accounting records.
HMRC: your company is dormant for Corporation Tax if it is not active, not liable for Corporation Tax, or not within the charge to Corporation Tax — in practice, not trading and with no other income.
Read those again. One is about your accounting records. The other is about your activity and income. They overlap most of the time, and then they don’t.
The Companies House test: no significant accounting transactions
This is a bookkeeping test, and it has no de minimis. A single transaction that belongs in the accounting records ends dormancy for that financial year — the amount is irrelevant.
A £6 monthly bank charge does it. So does one supplier invoice, one payment to an accountant from the company account, or one pound of bank interest credited to the company.
There is a short list of permitted transactions you can disregard. When deciding whether the company is dormant, ignore:
- payment for shares taken by subscribers to the memorandum of association
- fees paid to Companies House for a change of company name, the re-registration of a company, and filing confirmation statements (or annual returns)
- payment of a civil penalty for late filing of accounts
That is the whole list. Notice what is not on it: bank charges, accountancy fees, insurance premiums, domain renewals, subscription payments and standing orders nobody cancelled.
This is why experienced advisers tell dormant companies to close the bank account. An open account that levies a monthly fee will quietly disqualify the company from dormancy every single year.
The HMRC test: not within the charge to Corporation Tax
HMRC looks at whether the company is doing anything, not at what is in the ledger. Its guidance treats a company as active for Corporation Tax when it is carrying on a business activity, buying and selling goods with a view to profit, providing services, earning interest, managing investments, or receiving any other income.
Trading, for these purposes, includes buying, selling, renting property, advertising, employing someone or getting interest.
HMRC’s own examples of a dormant company are:
- a new company that is not yet trading
- an off-the-shelf or shell company held by a formation agent to sell on
- a company formed only to own an asset such as land or intellectual property, which will never trade
- an existing company that has traded but is not currently trading
- a company no longer trading and destined to be removed from the register
There is one extra route that applies only to clubs, unincorporated associations and flat management companies: HMRC may treat them as dormant if they are active but their annual Corporation Tax liability is not expected to exceed £100 and they are run exclusively for members’ benefit, subject to further conditions.
Pre-trading activity does not make a new company active. Writing a business plan or negotiating contracts before you open for business is not trading in HMRC’s eyes.
Side by side
| Companies House | HMRC | |
|---|---|---|
| The test | No significant accounting transactions in the financial year | Not active, not liable for, or not within the charge to Corporation Tax |
| What it looks at | The accounting records | Activity and income |
| Do you have to notify them? | No — dormancy is evidenced by the accounts you file | Yes — you must tell HMRC |
| What you file while dormant | Dormant accounts, every year | Nothing further once HMRC accepts it, unless a notice to deliver is issued |
| Confirmation statement | Still required every year | Not applicable |
| Cost to file | Free | Free |
| Telling them you have restarted | Not required — your next set of non-dormant accounts shows it | Required — you must register for Corporation Tax again |
Where the two definitions come apart
| Scenario | Companies House | HMRC |
|---|---|---|
| Incorporated last month, never traded, only subscriber shares issued | Dormant | Dormant |
| Stopped trading, no income at all, but the company bank account still charges a monthly fee | Not dormant | Generally dormant |
| Stopped trading, no income, accountancy fee paid from the company account | Not dormant | Generally dormant |
| Formed to hold intellectual property, no transactions of any kind | Dormant | Dormant |
| £40 of bank interest credited during the year | Not dormant | Not dormant — interest is income |
| Renting out a property, however small the rent | Not dormant | Not dormant |
The second and third rows are the ones that cost money. The director believes the company is dormant, HMRC agrees, and so they file the accounts they think are appropriate — dormant ones — when Companies House would say the company had significant accounting transactions and needs ordinary micro-entity or small company accounts.
HMRC decides its own position on Corporation Tax dormancy, so treat the middle column as the likely outcome rather than a guaranteed one.
What dormancy does not switch off
Being dormant reduces your filing obligations. It does not remove them.
Annual accounts are still due. All limited companies must deliver accounts to Companies House, whether they trade or not. Dormant accounts are shorter and free to file, but the deadline and the penalties are identical to any other company’s: 9 months after the end of the accounting reference period for a private company, or 21 months from incorporation (or 3 months from the accounting reference date, whichever is longer) for a first set covering more than 12 months. Late filing penalties start at £150 and reach £1,500, and they double if you file late in two successive financial years.
A confirmation statement is still due. Every company, including dormant and non-trading companies, must file one at least once every 12 months, within 14 days of the end of the review period.
Statutory accounts still go to your members. Filing a dormant balance sheet at Companies House does not remove the directors’ duty to prepare accounts for the company’s members.
A Company Tax Return is still due if HMRC has issued a notice to deliver one. Telling HMRC the company is dormant does not cancel a notice already issued. If you have received one, you must file.
“The company is dormant” is not an excuse for late accounts. Companies House lists it explicitly among the reasons an appeal against a late filing penalty is unlikely to succeed.
Frequently asked questions
Can a company be dormant for HMRC but not for Companies House?
Yes, and it is the most common mismatch. A company with no trade and no income is generally dormant for Corporation Tax, but if it pays bank charges or an accountancy fee from the company account it has had significant accounting transactions and is not dormant for Companies House.
Do I have to tell Companies House my company is dormant?
No. There is no notification. Dormancy is shown by the type of accounts you file, and you do not need to tell Companies House when you start trading again — the next set of non-dormant accounts does that for you.
Does paying the confirmation statement fee break dormancy?
No. Fees paid to Companies House for filing confirmation statements or annual returns, a change of company name or re-registration are disregarded, as is a civil penalty for late filing of accounts and payment for subscriber shares.
Is there a time limit on how long a company can stay dormant?
No. A company can remain dormant indefinitely as long as it keeps filing its accounts and confirmation statement each year. The registrar may start strike-off action if those filings stop.
What happens if I file dormant accounts when the company was not dormant?
The accounts do not comply with the Companies Act. Companies House can reject them, and if your filing deadline passes before corrected accounts are accepted, the company gets an automatic late filing penalty starting at £150.
Getting the classification right
The judgment call is almost never about whether you traded. It is about whether some small, forgotten payment moved through the company in the year — and whether the two regulators would reach the same answer about it.
SmartFiling handles dormant company filings on a fixed fee, including the dormancy assessment, the accounts, the confirmation statement and the HMRC position. Every filing is reviewed and signed off by an ICAEW Chartered Accountant, and everything is done online — no phone calls, no hourly billing.
