Dormant accounts or Full accounts?

[Christie L]

I have registered my Ltd business in 2016, opened a bank account, and hired a known-well accountancy via recommendation.

This accountant advised there was no need to file accounts, since the company was not trading. Over the years I used the business bank account to pay for costs/expenses in product development, marketing, software etc. Accountant continued to file dormant accounts every year.

The company is not trading, but the bank account continue to be active, with payments being done since 2016. There has been no income from sales or any other source, apart from what would be called (I presume) director's loans.

I hired a new accountant earlier this year, and full accounts were file for 2020, but I'd like to know if I should ammend the accounts back from 2016 onwards.

I have received conflicting advice and would love to hear the thoughts from the community.
Many thanks!

 

[DWS]

Your company has definitely not been dormant so that has been a mistake by filing as such.
What has the new accountant advised? They would know more about your business and whether the past transactions are ‘material’ or not

 

[Christie L]

Well, this is where it gets a bit complicated.

I made the decision to file the full accounts from 2016 onwards back in March, and asked the new accountants to do it.

Today, I discovered speaking to Cias House that the accounts they filled have been rejected. Three times. Accounts still not filed. I was unaware of it.

I am searching for a new accountant but need to understand whether the full accounts are indeed necessary (conflicting advice from different sources) so I can ask them to correct/finish the job, or just move to a new practice straight away, without filling full accounts.

 

[DWS]

So we’re dormant accounts filed with CH from 2016 onwards and it is these that you are trying to amend?

 

[Christie L]

Yes, exactly.

 

[DWS]

Your new accountants should know that they can only file amended accounts with CH on paper, is this what has been done and still rejected?

 

[Christie L]

CH mentioned something to do with 'duplicate' and the need for filing as 'ammended', and said it was a "basic mistake". They seem clueless for repeating the same mistake, and I lost trust.

My main question is the need of full accounts while not trading. If not needed I will just move on. If needed, it will get a bit more complicated with what I've paid them etc.

 

[DWS]

Impossible to say without knowing the transactions that took place, but it seems that no tax will be owed by the Company so I don’t think either CH or HMRC would be bothered whether you amend or not

 

[Christie L]

Well, that I can clarify. Only transactions of money going out, with paying of software subscription, freelancers, developers etc. There are 400+ transactions over the 4 years, but all the in same similar categories (software subscription x12/year, freelancers etc etc). Not a penny in income.

I am trying to get in touch with HMRC, but so far phone messages ask me to go to the website, and there things are not very clear.

 

[DWS]

Well by the sound of it I would think that it seems pretty much ‘material’ to the business so amended accounts may well be needed.
Begs the question why did the previous accountants not file accounts? and if you knew the company had paid out these amounts did you not question it?

 

[Christie L]

Neglect I guess. The previous accountant was alwasy so nice, but they never asked if I had spent anything, only if I was trading. I did mention at one point about the expenses, but was told if I was not trading it was not needed.

 

[WaveJumper]

Sounds like you have been trading to me but it will interesting to see what our accountants on here have to say

 

[DWS]

Sounds like you have been trading to me but it will interesting to see what our accountants on here have to say

I am an accountant unless I don’t count count as “on here”

 

[WaveJumper]

I am an accountant unless I don’t count count as “on here”

No you defiantly count count in my book

 

[DWS]

No you defiantly count count in my book

Now you’re taking the piss out of my stutter!
(Was that definitely or defiantly?)

 

[WaveJumper]

Now you’re taking the piss out of my stutter!
(Was that definitely or defiantly?)

I might have to think about that one

 

[Bobbo]

As already determined, the company was absolutely not dormant for Companies House purposes so the previously filed accounts are incorrect. Amended accounts should be filed for all of the offending periods.

It may be easier though to draw a line under things and just get the current year's accounts right (with a prior year adjustment to include the previous year's results).

For HMRC, yes there has been no tax loss. However because there presumably has not been a CT600 filed for any of the year, the losses from incurring these transactions have not been recorded and thus at presents are unavailable to be used to relieve any future profits should they occur. Whether this aspect is worth looking into correcting will depend on the amounts involved.

 

[Frank the Insurance guy]

If you have had outgoings and expenses, I think you should amend the accounts as these would then be considered losses, that you can offset against future profits - although I think you can only carry forward losses for a certain period of time - one of our accountants on here will confirm no doubt!

 

[DWS]

Losses can be carried forward for as long as the trade continues

 

[Christie L]

As already determined, the company was absolutely not dormant for Companies House purposes so the previously filed accounts are incorrect. Amended accounts should be filed for all of the offending periods.

It may be easier though to draw a line under things and just get the current year's accounts right (with a prior year adjustment to include the previous year's results).

For HMRC, yes there has been no tax loss. However because there presumably has not been a CT600 filed for any of the year, the losses from incurring these transactions have not been recorded and thus at presents are unavailable to be used to relieve any future profits should they occur. Whether this aspect is worth looking into correcting will depend on the amounts involved.

Speaking to different accountants today and it seems this is a grey area, it could either be dormant (= not trade) or full accounts but only to carry the losses. So I'm taking a look at whether it is worth it. It's not a huge amount and frankly, I wouldn't mind paying a little bit more tax to help the country.

 

[Christie L]

Losses can be carried forward for as long as the trade continues

That sounds great, but do you think I can do that even without filing for full accounts for those years?

 

[Christie L]

If you have had outgoings and expenses, I think you should amend the accounts as these would then be considered losses, that you can offset against future profits - although I think you can only carry forward losses for a certain period of time - one of our accountants on here will confirm no doubt!

Thanks, I'm looking into it right now

 

[DWS]

Speaking to different accountants today and it seems this is a grey area, it could either be dormant (= not trade) or full accounts but only to carry the losses. So I'm taking a look at whether it is worth it. It's not a huge amount and frankly, I wouldn't mind paying a little bit more tax to help the country.

It should not be a grey area as trading includes
Buying, selling, renting property, advertising, employing someone or getting interest
as described by Companies House
Also they say your Company can only be called dormant if it has had no 'significant' transactions in the financial year, 400 transactions in 4 years seems significant

 

[Christie L]

Yes, I read that as well, hence asking for them to file full accounts. But it seems as the company was not trading, nothing was spent as a way to generate income so should not be an issue. Two accountants assured me dormants is fine, two others that I should file. It is confusing.

 

[DWS]

Yes, I read that as well, hence asking for them to file full accounts. But it seems as the company was not trading, nothing was spent as a way to generate income so should not be an issue. Two accountants assured me dormants is fine, two others that I should file. It is confusing.

As you said though,
Product development, marketing, freelancers all this points towards trading, ultimately the decision lies with you whether you want to amend or not, as I said CH and HMRC probably couldn’t care less but at the moment it does not show a true reflection of the Company

 

[Christie L]

As you said though,
Product development, marketing, freelancers all this points towards trading, ultimately the decision lies with you whether you want to amend or not, as I said CH and HMRC probably couldn’t care less but at the moment it does not show a true reflection of the Company

Yes, indeed. I really appreciate the input, it has been helpful to make sense of things!

 

[Bobbo]

Losses can be carried forward for as long as the trade continues

The issue is that, based on what has been filed to date, the trade hasn't actually started yet, so at this moment the losses do not exist for tax purposes.

 

[DWS]

The issue is that, based on what has been filed to date, the trade hasn't actually started yet, so at this moment the losses do not exist for tax purposes.

I agree