Dormant Company: Do I Still Need to Pay Corporation Tax?

If your UK limited company is dormant — meaning it's not trading and has no income — you probably won't owe any corporation tax. But that doesn't mean you have no filing obligations.

Many directors of dormant companies get hit with unexpected penalties because they assume "dormant" means "nothing to do." Here's what you actually need to know.

What Makes a Company "Dormant"?

The definition depends on who's asking:

Companies House Definition

A company is dormant for Companies House purposes if it has had no "significant accounting transactions" during the accounting period. The only transactions that don't count are:

• Payment for shares when the company was formed
• Filing fees paid to Companies House

Everything else — even a single bank transaction — means the company is NOT dormant for Companies House purposes.

HMRC Definition

A company is dormant for HMRC purposes if it is not active — meaning it:

• Is not carrying on a trade or business
• Has no income (trading, investment, or otherwise)
• Has no chargeable gains

HMRC's definition is slightly broader. A company can be dormant for Companies House (no transactions) but might still need to deal with HMRC if it has, for example, outstanding tax liabilities from a previous active period.

Do Dormant Companies Pay Corporation Tax?

Short answer: No — if genuinely dormant, there are no profits to tax.

Corporation tax is charged on taxable profits. If your company has no income and no gains, there are no profits, and therefore no corporation tax to pay.

However, this doesn't eliminate your filing requirements.

Filing Obligations for Dormant Companies

1. Companies House: Dormant Accounts

Required: Yes, annually

Deadline: 9 months after accounting period end

What to file: Abbreviated dormant accounts (a simplified balance sheet)

Companies House offers a special template for dormant company accounts. It's a simple one-page balance sheet showing your share capital and any retained reserves from previous active periods.

Penalty for not filing: Same as active companies — £150 to £1,500 depending on how late.

2. HMRC: CT600 Return

It depends on your HMRC status:

If HMRC considers your company dormant: You can tell HMRC your company is dormant, and they may agree you don't need to file CT600 returns. HMRC will write to confirm this and will contact you if circumstances change.

If HMRC hasn't been notified: You still need to file a CT600 return confirming the company is dormant. This is a simple return showing nil profit and nil tax, but it must still be filed electronically.

If you've just become dormant: You should file a final CT600 for the period up to when you ceased trading, then notify HMRC that the company is now dormant.

3. Companies House: Confirmation Statement

Required: Yes, annually

Deadline: Within 14 days of the anniversary of incorporation (or last confirmation statement)

Filing fee: £13 online

This is required regardless of trading status. It confirms your company's registered office, directors, shareholders, and SIC code are up to date.

How to Tell HMRC Your Company Is Dormant

You can notify HMRC by:

1. Writing to your company's Corporation Tax office
2. Calling HMRC's Corporation Tax helpline
3. Including a note when you file your final active CT600

Once HMRC accepts your company as dormant:

• They won't issue CT600 notices to file
• They won't expect annual returns
• They'll contact you if they believe the company has become active again

Important: Keep HMRC informed. If your company becomes active again (starts trading or receives income), you must tell HMRC within 3 months.

What Breaks Dormancy?

Common transactions that break dormant status:

The Bank Interest Trap

This catches many directors: if your company bank account earns even a few pence of interest, the company may no longer be dormant for HMRC purposes. Consider switching to a non-interest-bearing account if you want to maintain dormancy.

Should I Keep My Dormant Company or Close It?

Reasons to Keep It

• You plan to trade again in the future
• You want to protect the company name
• The company holds assets (property, intellectual property)
• You want to maintain the company's trading history and age

Reasons to Close It

• No plans to trade again
• You want to avoid annual filing obligations and fees
• You want to avoid the risk of accidentally missing deadlines
• The company has no assets worth preserving

How to Close a Dormant Company

Two main options:

1. Strike off — Apply to Companies House using form DS01. Free, but takes about 3 months.
2. Voluntary liquidation — More formal, involves appointing a liquidator. More expensive but appropriate if the company has assets or liabilities.

Common Mistakes with Dormant Companies

1. Assuming "dormant" means "no obligations" — you still need to file at Companies House annually
2. Forgetting the Confirmation Statement — this is a separate requirement from accounts filing
3. Not notifying HMRC — if HMRC doesn't know you're dormant, they'll expect CT600 returns and may issue penalties for non-filing
4. Not spotting bank interest — even trivial interest can break dormancy
5. Missing the first-year deadline — newly incorporated dormant companies still have a first accounts deadline

Summary

Dormant companies generally don't pay corporation tax (no profits = no tax), but they DO still have filing obligations: annual accounts at Companies House, potentially a CT600 at HMRC (unless HMRC has confirmed dormancy), and an annual confirmation statement. Missing these deadlines triggers the same penalties as active companies.

If you plan to keep your dormant company, make sure you're filing on time. If not, consider striking it off to eliminate the ongoing obligations.