Contractors’ Questions: Can I file dormant accounts or are my transactions ‘significant’ in Companies House’s eyes?

Contractor’s Question: My contractor limited company hasn't traded for a few years now, although it has traded in the past.

Nonetheless I have been filing ‘micro entity’ accounts via an accountant as I want to keep the company open, with a view to resuming trading at some point.

My understanding is that dormant accounts can be filed instead - with Companies House - if no significant transactions have occurred. Is that correct?

Apart from the annual Confirmation Statement, the only transactions are my accountant's fees and my company email service.

So would Companies House view any of these transactions as significant - or would it be acceptable to file dormant accounts? Thanks in advance for an answer.

Expert’s Answer: Thanks for your question.

Companies House does facilitate a dormant filing service as you note, but they have specific requirements for this form to be filed.

Who Companies House says dormant company accounts are suitable for

On the “Dormant Company Accounts” (DCA) AA02 form, it notes that the DCA is only suitable for:

“Companies limited by shares which have never traded”.

This means that, even if transactions via your company qualify as ‘insignificant,’ the fact your limited company has traded in the past means you will be obligated to continue filing micro-entity accounts.

How about switching off accounting periods, via HMRC?

HMRC’s schemes on the other hand operate differently. They will allow for accounting periods to be switched off, if you have no trading profits/losses to report. These can be switched back on once your circumstances changes.

Be aware, this may not be advisable if the company was to own a company car (needing to file a P11d to record the benefit-in-kind), earning interest on company reserves, or have ongoing business expenses that could cause trading losses, which could be carried back or forward depending on your circumstances.

What constitutes an insignificant expense?

Companies House allows the following company transactions to occur while still being deemed “dormant”:

• Filing fees

The company will still need to file form CS01 annually, confirming the records Companies House holds about the company.

There was a big uplift recently in this fee, from £12 to £34 per annum.

In your situation, you would need to review whether there have been any changes to the directorship/secretaries, people with significant control, and the company’s registered office address. Even if there have been no changes, the form is still required to be filed.

• Penalties for Companies House

Even if the company is dormant, it is still a legal requirement to file annual accounts and if not filed on time (normally within 9 months of the year-end), you can be monetarily penalised by Companies House.

The penalty amount is staggered based on how late the return is filed but be aware it can range from £150 to £3,000, depending on the number of offences. 

• Share transactions

The company will need to have at least one shareholder on its incorporation.

This value will be shown in the accounts depending on the cost of the share.

You have the option of leaving this unpaid if you have no business bank account or can compensate the business for its cost if you prefer to have the shares paid for.

Lastly, talk it out to achieve two lots of avoidance…

Standing back from the detail, I would recommend that you have a chat with an accountant (or your existing accountant), with the aim of avoiding both any unnecessary fines and the trouble of closing tax schemes with HMRC if no longer trading. Good luck!

The expert was Dan Mepham, managing director of contractor accountancy specialists SG Accounting.