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Understanding Dormant Company Accounts

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A dormant company in the UK is defined as a company that has not had any significant accounting transactions during its financial year.

When considering whether a company is dormant the following financial transactions are allowable:

  • Payment for shares taken by subscribers to the memorandum of association
  • Fees paid to the Registrar of Companies for a change of company name
  • The re-registration of a company and filing annual returns
  • Payment of a civil penalty for late filing of accounts

The term ‘dormant company’ has legal significance quite separate to a company that may be described as being a non-trading company. A company may have other transactions, such as bank interest received, entered into accounting records that, though not related to trading, would disqualify the company from preparing dormant company accounts.

A company may be dormant for a number of reasons, for example, to protect a company name in readiness for a future project, or to hold an asset or intellectual property.

Remaining dormant

There is no time limit on a company remaining dormant however; the company must still comply with the statutory reporting requirements required of a normal active company. The fact that the company is not trading does not dilute the directors’ responsibilities for running the company.

If documents are not submitted to Companies House by the due date, then Companies House will issue penalty notices.

The directors are responsible for ensuring the dormant company submits the following:

  • An annual return ARO1 Annual Return: This form discloses the situation of the company’s registered office, together with director details and shareholdings and must be submitted to Companies House each year.
  • Dormant company accounts: A company must file accounts with Companies House each year whether it has traded or not. If a company has been dormant from incorporation, and its financial year has not been amended, then it must file the first dormant accounts within 21 months of the date of incorporation. For each subsequent year dormant accounts must be filed within 9 months of the financial year-end unless the year-end is changed. Changing the financial year-end will affect the date by which accounts will be required to be filed dependent on whether the period is shortened or extended, and when the request to amend it is made.

If the company has never traded

Dormant accounts can be submitted to Companies House online through their web filing facility or by downloading, completing and returning a copy of the AA02 form. This is suitable for companies who have not traded, but is unsuitable for a company that has balance sheet entries from a previous year’s trading activity when a more detailed balance sheet would be required. Where opting to file dormant accounts in paper format the completed AA02 form should be sent recorded delivery to: Companies House, Crown Way, Maindy, Cardiff CF14 3UZ.

If the company has traded in the previous accounting period

The annual accounts of a private dormant company normally consist of an abbreviated balance sheet with the statutory notes. The directors’ report and profit and loss account are not required.

If accounting transactions have occurred that would have appeared in a profit and loss account, the company would be disqualified from being dormant except for the exemptions stated above. If the company has not traded in the current year then the abbreviated balance sheet for the current and previous year will record the same figures.

The balance sheet must be signed and dated by a director before submission.

 

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