How to Make a Company Dormant
Making a company dormant is a common request, whether it’s for taking a break or due to business challenges. To help you navigate this process, I’ve put together a guide addressing frequently asked questions and offering essential advice.

What is a Dormant Company?
A dormant company, as defined by HMRC and Companies House, is a company with no significant accounting transactions. This means the company has no business income or expenses, except for necessary filings to maintain its registration. These exceptions include:

• Filing fees paid to Companies House

• Penalties for late filing of accounts

• Paying late filing penalties to HMRC

• Money paid for shares at incorporation

To determine if you qualify for dormant status, check my detailed guide on Dormant Companies.

Steps to Make Your Limited Company Dormant

1. Clear Outstanding Debts: Ensure all suppliers are paid, wages and salaries are settled, and trade debtors have paid you.

2. Update Tax Affairs: Submit all corporation tax returns and pay any owed taxes. Cancel VAT registration if applicable and ensure all returns are up-to-date.

3. Adjust Financial Records: Reverse any accruals or prepayments, dispose of fixed assets, and close your business bank account.

4. Cease Trading: Officially stop all trading activities.

The specifics may vary based on your business, so review your situation carefully.
Informing HMRC of Dormant Status

Once all outstanding returns are complete, notify HMRC that your company is no longer trading. HMRC will continue to expect Corporation Tax Returns unless you inform them otherwise. Failing to do so could result in fines. For guidance on notifying HMRC, including a sample letter, refer to my guide “How to File Dormant Company Accounts Online.”

Filing Requirements for a Dormant Company
Despite being dormant, you must still file certain documents annually:

• Dormant Company Accounts (AA02 Form) with Companies House

• Confirmation Statement with Companies House

• HMRC Tax Return annually or a one-off notification of dormant status

Further details on administration and filing requirements can be found in my comprehensive guide.

How Long Can a Limited Company Be Dormant?
A company can remain dormant indefinitely as long as you continue to file the necessary paperwork to keep it on the Companies House register.

Can a Limited Company Trade While Dormant?
No, a dormant company cannot engage in trade. Any trading activity would invalidate its dormant status and could lead to penalties from HMRC and Companies House.

Can a Dormant Company Have Expenses?
A dormant company can incur basic expenses related to maintaining its status, such as:

• Filing fees to Companies House

• Penalties for late filing of dormant accounts

• Late filing penalties for HMRC returns

• Money paid for shares at incorporation

However, it should not have any trading-related costs.

Does a Dormant Company Need a Bank Account?
Typically, a dormant company does not need a bank account. It’s advisable to close the account once trading ceases to avoid unnecessary complications.
Is a Dormant Company a Going Concern?
Dormant companies are considered a going concern due to their existence, despite not trading.

Filing CT600 for a Dormant Company
If you don’t notify HMRC of your dormant status, they will expect an annual CT600, though no tax is due. You can avoid this by informing HMRC, as detailed in my guide “How to File Dormant Company Accounts Online.”

Can You Take Dividends from a Dormant Company?
No, dividends should be taken before ceasing trade. A dormant company cannot pay dividends as it would lose its dormant status.

Can a Dormant Company Hold Assets?
Generally, a dormant company should not hold assets. However, exceptions like holding a freehold property are allowed, provided the company does not trade or collect rent.
For more information on making your company dormant and maintaining compliance, refer to my detailed guides.
Get the full guide to Dormant Companies