Can a company be dormant for corporation tax but not for companies house?

[anonuk]

As the title really, I have a company that is not currently trading and likely won’t trade for a few years as I concentrate on my main business.

I’ve been tossing around the idea of closing the company but as we have a bounce back loan, I don’t want to not pay that off, so I want to keep the company going mainly to pay the loan off. So, I’ve been doing a bit of research and have come across making a company ‘dormant for corporation tax’.

So, my question is, while I’m still paying a loan off (which will be from my personal finances), can I declare the company ‘dormant for corporation tax’ without making the company dormant on companies house?

I know the company can’t be made dormant on companies house as it still has a loan outstanding, but gov.uk seems to only mention ‘trading and other income’.

Obviously, if I can get out of filing corp tax returns that will make much better financial sense than paying an accountant to file returns with everything at zero.

 

[Ozzy]

You only pay corporation tax on profits, so if the company isn't trading and is building up debt (as in I presume you are personally lending the company to pay off the loan) then it isn't actually dormant for either but there won't be any tax because it isn't making a profit.

 

[anonuk]

You only pay corporation tax on profits, so if the company isn't trading and is building up debt (as in I presume you are personally lending the company to pay off the loan) then it isn't actually dormant for either but there won't be any tax because it isn't making a profit.

Technically speaking the company isn’t ‘building up debt’ because I’m paying the loan off personally, and I’m not necessarily doing it as a loan to the company. Though, if I were, the level of debt would stay the same rather than increasing/going down so at the end, the company would owe me instead of the bank if that makes sense.

That said, the guidance on gov.uk just says

Dormant is a term that HMRC and Companies House use for a company or organisation that is not active, trading or carrying on business activity. But HMRC and Companies House use the term dormant in slightly different ways.

For Corporation Tax purposes, HMRC views a dormant company as a company that’s not active, not liable for Corporation Tax or not within the charge to Corporation Tax.

Your company is usually dormant for Corporation Tax if it:

• has stopped trading and has no other income, for example investments
• is a new limited company that hasn’t started trading
• is an unincorporated association or club owing less than £100 Corporation Tax
• is a flat management company

Trading includes buying, selling, renting property, advertising, employing someone or getting interest.

 

[anonuk]

You only pay corporation tax on profits, so if the company isn't trading and is building up debt (as in I presume you are personally lending the company to pay off the loan) then it isn't actually dormant for either but there won't be any tax because it isn't making a profit.

Just to add, I understand the company won’t be paying any tax due to not making a profit but it’d still need an accountant to file the accounts which costs money.

 

[Newchodge]

Just to add, I understand the company won’t be paying any tax due to not making a profit but it’d still need an accountant to file the accounts which costs money.

I would have thought you could do that yourself. Wouldn't paying an accountant make the company undormant, as it would be purchasing services.

 

[Scalloway]

What is active for Corporation Tax purposes? Basically if the compnay is receiving income it is active. If it is just paying off debts or paying interest it is inactive.

Corporation Tax: trading and non-trading

Find out about being 'active', trading and non-trading, and being dormant if you’re a new or existing company or organisation.

www.gov.uk

 

[WaveJumper]

Its fairly straight forward to complete dormant company accounts. Are you actually based in the UK as your name suggests

 

[Scalloway]

Dormant accounts can only be filed when the company has never traded. The OP will need to file accounts in the standard format.

 

[WaveJumper]

Dormant accounts can only be filed when the company has never traded. The OP will need to file accounts in the standard format.

Yes sorry quite correct

 

[anonuk]

What is active for Corporation Tax purposes? Basically if the compnay is receiving income it is active. If it is just paying off debts or paying interest it is inactive.

Corporation Tax: trading and non-trading

Find out about being 'active', trading and non-trading, and being dormant if you’re a new or existing company or organisation.

www.gov.uk

Thanks, that’s what I was trying to clarify. So I can declare the company as dormant for corporation tax but still prepare the normal
accounts myself for companies house?

 

[Scalloway]

So I can declare the company as dormant for corporation tax but still prepare the normal
accounts myself for companies house?

Yes

 

[Gyumri]

Dormant accounts can only be filed when the company has never traded.

That's obviously not correct. A company can trade one year and the next year it can be dormant.

 

[Smallbusinessman]

That's obviously not correct. A company can trade one year and the next year it can be dormant.

Scalloway is correct

 

[Gyumri]

A company can be dormant for any period and resume trade during any period:

"Your company is called dormant by Companies House if it’s had no ‘significant’ transactions in the financial year.....You do not need to tell Companies House if you restart trading. The next set of non-dormant accounts that you file will show that your company is no longer dormant."

 

[PCD]

There are a lot of replies to this thread which are not strictly accurate. the rules for HMRC and CH are different. The important thing for HMRC is whether the company is trading or has income subject to CT. HMRC has no concept of dormant. If the company is not trading and has no taxable income such as interest or rental income HMRC can be advised that no CT Returns are due. Accounts will still need to be prepared and submitted to Companies House. A company can prepare dormant accounts if it has no transactions in the year, other than certain exemptions such as payment of CH fees and payments received for subscriber shares. if a company has been dormant since incorporation it can submit the form AA02 as its accounts. Dormant company account can still be produced if it is dormant but has not always been dormant. Too much emphasis is placed on dormant accounts as it is just as easy to prepare micro entity accounts under FRS105 as dormant accounts. Dormant accounts real usefulness was back when all companies required an audit but there was an exemption for dormant companies (pre–Companies Act 1989?).

 

[Bobbo]

Technically speaking the company isn’t ‘building up debt’ because I’m paying the loan off personally, and I’m not necessarily doing it as a loan to the company. Though, if I were, the level of debt would stay the same rather than increasing/going down so at the end, the company would owe me instead of the bank if that makes sense.

If your personally paying the company's loan repayments isn't you loaning money to the company, what exactly is it?

Also, the amounts wouldn't be the same as the company would be incurring interest on the Bounceback loan so the amount of money you are loaning the company to meet the BB loan repayments would exceed the current value of the loan.

 

[anonuk]

If your personally paying the company's loan repayments isn't you loaning money to the company, what exactly is it?

Also, the amounts wouldn't be the same as the company would be incurring interest on the Bounceback loan so the amount of money you are loaning the company to meet the BB loan repayments would exceed the current value of the loan.

At present, I am paying the repayments on the loan without ‘loaning’ the company the money to do so, eg, I’m not expecting the company to pay me back, not adding it to a directors loan account, etc.

 

[Newchodge]

At present, I am paying the repayments on the loan without ‘loaning’ the company the money to do so, eg, I’m not expecting the company to pay me back, not adding it to a directors loan account, etc.

Why?

 

[Bobbo]

At present, I am paying the repayments on the loan without ‘loaning’ the company the money to do so, eg, I’m not expecting the company to pay me back, not adding it to a directors loan account, etc.

What's your double entry in the company's accounting records?

Debit Bounceback Loan £XXX
Credit ?????? £XXX

 

[anonuk]

Why?

Purely out of choice. The company isn’t trading so doesn’t have any income to pay the loan and rather than try and dodge my responsibilities I’m repaying the loan.

What's your double entry in the company's accounting records?

Debit Bounceback Loan £XXX
Credit ?????? £XXX

At present I’ve not entered anything into the accounts.

 

[newbieuk]

As the title really, I have a company that is not currently trading and likely won’t trade for a few years as I concentrate on my main business.

I’ve been tossing around the idea of closing the company but as we have a bounce back loan, I don’t want to not pay that off, so I want to keep the company going mainly to pay the loan off. So, I’ve been doing a bit of research and have come across making a company ‘dormant for corporation tax’.

So, my question is, while I’m still paying a loan off (which will be from my personal finances), can I declare the company ‘dormant for corporation tax’ without making the company dormant on companies house?

I know the company can’t be made dormant on companies house as it still has a loan outstanding, but gov.uk seems to only mention ‘trading and other income’.

Obviously, if I can get out of filing corp tax returns that will make much better financial sense than paying an accountant to file returns with everything at zero.

Hi,

pls im in this exact same situation as in im not sure whether to file dormant accounts for HMRC just for corporation tax.

What did you end up doing pls?