In this article, we'll show you how to reactivate a dormant Company so that its owners can resume trading. But first, let's review what a dormant company is and what it means.
What is the definition of an inactive business?
A dormant firm is one that is not engaged in any business activity or generates any revenue. HM Revenue and Customs (HMRC) and Companies House, the registrar of companies, have slightly different definitions of a defunct company. An inactive company, according to HMRC, is one that:
- has ceased trading and does not have any other sources of income, such as investments
- is a newly formed limited liability corporation that has yet to begin trading.
- is a non-profit club or organisation that exists solely for the benefit of its members and owes less than £100 in Corporation Tax
- is a corporation that manages flats.
An inactive company, according to Companies House, is one that has had no substantial accounting transactions in the previous financial year. As a result, it couldn't have made any money or earned bank interest throughout this time.
How can I reactivate my defunct business?
If a dormant limited company begins trading again, the company directors must notify HMRC. This should be completed within three months of the company's resumption of trading or receipt of income. It will also be necessary to prepare statutory accounts and a corporate tax return. The following are the stages to resurrecting a moribund business:
Corporation tax registration – the directors should register for Corporation Tax to notify HMRC that the company has commenced trading.
Accounts – Within 9 months after the accounting reference date, the company's accounts shall be sent to Companies House.
Payment of corporation tax — any corporation tax owed must be paid within 9 months and 1 day of the accounting reference date of the company.
Tax return – A company's tax return must be filed with HMRC within 12 months of its accounting reference date.
Please keep in mind that if the inactive company has never traded previously, it must first register with HMRC.
If an inactive company reopens for business, there is no need to notify Companies House. This is because the formerly dormant firm will be reactivated in the following set of statutory accounts.
What are the filing deadlines for reactivating a dormant business?
Even if a company is inactive, its directors must file annual statutory company accounts with Companies House. A confirmation statement must also be filed every year. As a result, when a dormant company is reactivated, the timeframes for submitting statutory accounts and confirmation statements remain the same.
When a dormant company becomes active, however, the deadline for filing corporation tax changes. When the company resumes trading, the accounting period will begin again. The Companies House accounting reference date and the end of the Corporation Tax accounting period can, however, be aligned by:
- maintaining the same accounting reference date with Companies House
- statutory accounts will be prepared as normal for the 12 months leading up to the accounting reference date.
- Accounts are sent to Companies House and used to fill up the Company Tax Return.
