Reasons to leave my company dormant? Reasons to leave my company dormant?
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  1. #1

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    Default Reasons to leave my company dormant?

    So my accountant suggests that I make my company dormant, instead of closing it down. His reasons for that were the hassle that I would have to go through for re-opening my company again, if I chose to re-open it.

    Any other reasons that people think I should leave my company dormant?

    many thanks!

  2. #2

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    When I was looking at moving into a perm role last year all the advice I got was to close it down. It took no time at all to open the company when I first set it up so personally I think the hassle factor of keeping it open outweighs that of possibly needing a newco at some point in the future

  3. #3

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    Quote Originally Posted by SarahL2012 View Post
    When I was looking at moving into a perm role last year all the advice I got was to close it down. It took no time at all to open the company when I first set it up so personally I think the hassle factor of keeping it open outweighs that of possibly needing a newco at some point in the future
    That echoes my advice too. Also you can't claim entrepreneurs relief on a non trading company so if you do decide to close it down at a later date you may be liable to pay additional tax on the funds in your business bank account.

    Contractors' Questions: Will my limited company qualify for Entrepreneurs' Relief? :: Contractor UK

  4. #4

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    Quote Originally Posted by kesm View Post
    So my accountant suggests that I make my company dormant, instead of closing it down. His reasons for that were the hassle that I would have to go through for re-opening my company again, if I chose to re-open it.

    Any other reasons that people think I should leave my company dormant?

    many thanks!
    There are legitimate reasons (e.g. if YourCo has a trading history/reputation, brand, important physical assets etc.). However, in most cases, I can't see the purpose of retaining a dormant company. It's easy to form another company and, providing you're not doing this with phoenixing in mind (which you aren't), I can't see any issues. If YourCo has any income (even a small amount of interest, for example), you won't be able to maintain the dormant status. As others have indicated, there may be issues with ER later on too. Also, you'll be paying accounting fees (I'll give your accountant the benefit of the doubt...), possibly reduced, but still...

  5. #5

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    Agree with all the thoughts above. To my mind dormancy simply isn't a viable option for your typical contractor company.

    You only get benefits of reduced admin where a company is dormant for an entire accounting year. People sometimes "I'll make my company dormant" when taking a 3 month break between contracts....no you won't!

    If you really want to reduce the admin properly you'll want to de-register for VAT and as an employer. By the time you've done that it's trivially more work to get the company struck off (though look into an MVL if there's >£25k net assets).

    Incorporating a new company and registering it for VAT/PAYE is negligibly harder/more expensive than reviving a dormant company and registering it (again) for VAT/PAYE.

  6. #6

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    Quote Originally Posted by SarahL2012 View Post
    When I was looking at moving into a perm role last year all the advice I got was to close it down. It took no time at all to open the company when I first set it up so personally I think the hassle factor of keeping it open outweighs that of possibly needing a newco at some point in the future
    Thanks all! So my accountant said that I need to find a liquidator so they can close the company down. Any ones that you can suggest please?

    Many thanks all

  7. #7

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    Quote Originally Posted by kesm View Post
    Thanks all! So my accountant said that I need to find a liquidator so they can close the company down. Any ones that you can suggest please?

    Many thanks all
    If you've got >£25k net assets it'll often be a good idea.
    #ahem w ww.mvlonline.co.uk #cough
    ^^I am biased being part owner of the above...but they've successfully helped quite a few (often now ex) Contractor UK forumers get their cash out tax efficiently.
    Last edited by cojak; 12th February 2015 at 13:00. Reason: Cough away Dear, the link is still removed...

  8. #8

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    Quote Originally Posted by kesm View Post
    So my accountant suggests that I make my company dormant, instead of closing it down. His reasons for that were the hassle that I would have to go through for re-opening my company again, if I chose to re-open it.

    Any other reasons that people think I should leave my company dormant?

    many thanks!
    If you are thinking of contracting again soon through a ltd company, then I agree with your accountant to let the company go dormant for a while. However, when the company is dormant you will still need to file accounts, annual return, self-assessment tax return etc that the accountant will expect fees for. So if you are not at all sure whether or not you want to return to contracting, it will be cheaper to close the company down; then if you do want to start trading through a ltd company again in a few years time, just form another.

    Graeme Bennett ACMA MBA

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