How to Make Your Limited Company Dormant

Pressing Pause on Your Limited Company

Hey there! If you ever feel like you need a breather from contracting or want to protect your business for the future, putting your limited company into a ‘dormant’ state is a super practical option. Not only does it let you skip the hassle of closing down, but it also preserves your company name, shields your brand, and keeps everything ready for when you're ready to trade again.

Let’s walk you through what you’ll need and the steps to get it done, with some troubleshooting tips just in case things get tricky!

What You'll Need On Hand

Before you start, it helps to prepare a few things:

• Your Companies House login credentials
• Director details and company information
• Your latest company accounts
• Access to previous tax records (just in case HMRC asks)
• Any paperwork linked to business bank accounts or VAT registration

Step-by-Step: Making Your Company Dormant

1. Understanding When Your Company Is Truly Dormant

A company is considered dormant if it hasn’t had any “significant” transactions during the financial year. This means:
• No buying or selling goods or services
• No paying salaries or operating payroll
• No issuing dividends
• No earning interest or paying bank charges
• No property rental

If any of the above happen, your company loses its dormant status and gets treated as active again.

2. Filing Dormant Accounts and Confirmation Statement

• Annual Dormant Accounts: You must send a basic balance sheet and related notes to Companies House every year (even if nothing’s changed). Do this within nine months after your financial year ends.
• Confirmation Statement: Each year, you’ll also file this statement, confirming your company’s key facts (name, address, directors, shareholders, and so on). You have 14 days after your company’s anniversary date to submit it. Even if nothing’s changed, this step is a must.

Don’t worry, these filings are much simpler than regular trading accounts!

3. Dealing With Bank Accounts

• If you can, avoid opening a company bank account until you're ready to trade.
• If you have one already, close it and pay off all fees and charges before declaring the company dormant.
• Any business costs, like annual filings, can be paid from your personal account while the company is dormant.
• Cancel all standing orders and direct debits—no payments should be moving through the business.

4. Handling Tax and VAT

• You don’t need to submit corporation tax returns or pay corporation tax while dormant, as long as you do not trade.
• If your company was VAT registered, let HMRC know you’re ceasing business and cancel registration (form VAT 7 is your friend here).
• As a director, you still need to complete your own self-assessment tax return for personal tax matters.

5. Telling HMRC Your Company Is Dormant

• Getting there from active: Write to HMRC or use their portal to inform them that your company is now dormant. They will confirm, and you won’t need to file full accounts unless you start trading again.
• Reactivating your company: If you want to start trading again in the future, you must tell HMRC within 3 months. Just log in and register the company as active. If it’s never traded, register online for corporation tax.

Troubleshooting Common Pitfalls

What if you accidentally receive money? That counts as trading, so the company loses dormant status. You’ll need to file a tax return and pay any due taxes for that period.

Missed a filing deadline? Try to act fast! Late filings can result in penalties. Use Companies House’s online system for quick submissions.

Forgot to inform HMRC? You could be liable for tax even if you think you’re dormant. Always keep HMRC in the loop!

Key Points to Remember

• You must file dormant accounts and a confirmation statement each year, even if there’s no activity.
• Avoid any business transactions or bank fees in the company’s name while dormant.
• Stay on top of your deadlines for Companies House and HMRC.
• Re-activate your company easily when you’re ready to resume trading—just notify HMRC within three months of new business activity.

Ready to Take a Business Break?

Making your limited company dormant is straightforward and a great way to pause your business with minimal fuss. Keep your filings up to date, keep HMRC informed, and you’ll keep your company ready for the future—whether your next chapter is just a few months away or somewhere down the line.

If you need help or want to make sure you’re taking the right steps, speak with a contractor accountant or professional adviser. Want more guides and tips for contractors? Explore other handy resources on our site and save yourself time and stress!