Running your own limited company is arguably the best way of contracting. You can enjoy more freedoms and there is the potential to take home more of your hard-earned money. But despite its benefits, there are times when you may wish to stop operating under a limited company for a period of time. Whatever the motivation, it is important to be aware of how to properly make your company dormant.
A dormant company is one which has been registered with Companies House but is not actively trading or receiving any form of income. You can choose to make your company dormant from its date of incorporation or after a period of activity. After the dormancy process has taken place, if it participates in any kind of trading activity or generates income, it will forgo its inactive status.
There are different circumstances in which a contractor may want to register their company as dormant. Registration can be beneficial if you want to take a break from contracting and return to permanent employment for a period of time. Alternatively, you may want to register a limited company for future use.
To do this, you must first contact your local Corporation Tax office in writing with the date which your company has or will be inactive. HMRC will then require a Company Tax Return if your company was previously active. This should be sent to HMRC online before your company can be considered dormant. You will also need to pay any outstanding Corporation Tax.
Before your company is declared dormant, you will need to close your payroll and ensure all outstanding bills are paid.
There is no time limit on making your company dormant, but once your limited company has been registered, there are certain obligations which you must fulfil.
You will still need to file annual accounts with Companies House. This statement will outline all of your key company dates, as well as director details and information about any shares issued. Once your company is registered dormant, you cannot have paid employees. Similarly, you cannot pay dividends to shareholders without making the company active again.
Getting the best advice regarding your limited company is not always easy. As the UK’s leading contractor accountants, we are well-placed to provide ongoing support with your company’s accounts.
For help and advice regarding company dormancy, take a look at our company dormancy service.
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