New dormant company advice
Discussion
In the current climate, I wish to register my name as a company name just in case I need it later. As I see it, I need to register it ( £20 + ) and then file accounts and an annual return. If I keep it dormant, do I just sit back and leave it or do I still need to file anything.
I wish this to be as painless as possible.
I wish this to be as painless as possible.
If it is GENUINELY dormant - i.e. there are no transactions OF ANY SORT (apart from the issue of original shares) then the company STILL needs to submit both the Annual Return and annual accounts to Companies House.
The Annual Return can be filed either by paper or on line. The fee for paper filing is £30.00 and £15.00 for on line.
Dormant accounts need to comply with Companies Act layout requirements and must be filed within ten months of the end of the accounting year end (or 22 months after the date of incorporation if the first set of accounts).
The ten month filing window is being shortened to nine months for all accounting years beginning on or after 6 April 2008.
An alternative to filing dormant company accounts is to submit a Companies House Form DOR1 each year. This is accepted as a substitute for proper accounts - as long as the company remains truly dormant.
If the company has a bank account and it generates interest income or interest and bank charge expenditure, it is NOT dormant and can not avail of the above provisions.
It must then submit normal small company accounts - although it will be allowed to submit Abbrevioted format accounts to Companies House.
The Annual Return can be filed either by paper or on line. The fee for paper filing is £30.00 and £15.00 for on line.
Dormant accounts need to comply with Companies Act layout requirements and must be filed within ten months of the end of the accounting year end (or 22 months after the date of incorporation if the first set of accounts).
The ten month filing window is being shortened to nine months for all accounting years beginning on or after 6 April 2008.
An alternative to filing dormant company accounts is to submit a Companies House Form DOR1 each year. This is accepted as a substitute for proper accounts - as long as the company remains truly dormant.
If the company has a bank account and it generates interest income or interest and bank charge expenditure, it is NOT dormant and can not avail of the above provisions.
It must then submit normal small company accounts - although it will be allowed to submit Abbrevioted format accounts to Companies House.
Then it was not technically dormant in its initial accounting period.
If it spends money - then does not trade for a couple of years - and then commences trade, it could be taken as being dormant for the period when nothing genuinely happened.
However there can be pitfalls if seeking dormant status. For example, if the company incurred genuine trading costs in its first year and ended up with a first year trading loss - but then opted for dormant status at Companies House - those initial trading losses will be locked into an old trading period and made unavailable for offset against future trading profits. The logic being that the first period of trade had ceased and the new recommenced trade had nothing to do with the original one.
Therefore, perhaps NOT going down the dormant route may be a better bet especially if you intend to offset old trading losses at a later date.
The tax allowance of these old losses will still not be guaranteed, but if you go down the "doremant comapny" route you are indicating the the two trading periofds before and after the dormant period are different trades.
To be honest, it is almost as simple not to bother with official dormant company accounts and just submit the normal "small company" abbreviated accounts - if at all possible.
If it spends money - then does not trade for a couple of years - and then commences trade, it could be taken as being dormant for the period when nothing genuinely happened.
However there can be pitfalls if seeking dormant status. For example, if the company incurred genuine trading costs in its first year and ended up with a first year trading loss - but then opted for dormant status at Companies House - those initial trading losses will be locked into an old trading period and made unavailable for offset against future trading profits. The logic being that the first period of trade had ceased and the new recommenced trade had nothing to do with the original one.
Therefore, perhaps NOT going down the dormant route may be a better bet especially if you intend to offset old trading losses at a later date.
The tax allowance of these old losses will still not be guaranteed, but if you go down the "doremant comapny" route you are indicating the the two trading periofds before and after the dormant period are different trades.
To be honest, it is almost as simple not to bother with official dormant company accounts and just submit the normal "small company" abbreviated accounts - if at all possible.
Edited by Eric Mc on Friday 6th February 09:50
No problem with Companies House. It's HMRC who could have problems.
If the company had set-up costs - purchase of capital equipment, purchase of stock, market research costs etc, there could be difficulty in getting tax relief on some (if not all) of those costs if and when the company really did begin trading.
You would have to show that the costs incurred at the beginning were "wholly and exclusively" for the purpose of the trade that didn't actually commence until a number of years later.
In the year the costs were incurred, Capital Costs would end up in the balance sheet and the appropriste Capital Allowances would be claimable. Direct Costs and Overheads would be charged to the Profit and Loss account where, since there would be no income, a Loss would be shown for the first year. The tax allowability of that initial loss would be dependent on the "wholly and exclusiively" test mentioned above. The allowability of Capital Allowances could also be a problem although there would be more flexibility in the way in which they could be claimed making their allowability less of an issue.
If the company had set-up costs - purchase of capital equipment, purchase of stock, market research costs etc, there could be difficulty in getting tax relief on some (if not all) of those costs if and when the company really did begin trading.
You would have to show that the costs incurred at the beginning were "wholly and exclusively" for the purpose of the trade that didn't actually commence until a number of years later.
In the year the costs were incurred, Capital Costs would end up in the balance sheet and the appropriste Capital Allowances would be claimable. Direct Costs and Overheads would be charged to the Profit and Loss account where, since there would be no income, a Loss would be shown for the first year. The tax allowability of that initial loss would be dependent on the "wholly and exclusiively" test mentioned above. The allowability of Capital Allowances could also be a problem although there would be more flexibility in the way in which they could be claimed making their allowability less of an issue.
I have a dormant company, you can now file Dormant Accounts online at Companies House, I printed them out after filing them and posted them a copy too, just in case the online bit didn't work, but they sent them back saying that they were duplicate (of course throwing them away would have been cheaper but.....)
My dormant comapny just has 2 shares, two officers, no bank accounts, nothing else.
davidy
My dormant comapny just has 2 shares, two officers, no bank accounts, nothing else.
davidy
Stamp said:
David, It really is simple then? How much does it cost you a year? Do you do it your self?
For a dormant company it is very simple, and you don't need an accountant to do it. Once your company is established correctly, as Eric says you'll need to do two things every year - online is easier and cheaper.You should register at the Companies house website and get a login and password.
Once a year you have to complete a Shuttle Return, confirming details of your official address and Directors. Very simple (it's issued pre-completed), and pay £15 by credit card (£30 if you stick with paper). Penalties for late returns are rather high, so whilst you'll get a reminder, it's worth sticking a task in your calendar.
You also have to submit accounts, online this is done by a rather pernickety pdf that tries to check your numbers before you transmit it. They are very basic, and an accountant friend would be helpful the first time (or ask here, it's only two minutes of work) - the main trick is to remember that if you have issued 5 x £1 shares, your company officially still has £5 of assets. After the first year, the figures will be the same every year. Filing accounts is free but there are late penalties. Being crafty, your shuttle and accounts dates should be within days, so you do both at the same time and use the same calendar reminder.
The website also has forms for other things you have to do if circumsatnces change - address, directors and such.
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