How Dormant Company Accounts Can Help Saving You Money
Most businesses have shut down due to the coronavirus pandemic. Though on the surface, things seem hopeless for your establishment, upon further consideration, you’ll realize that there’s a way to keep it functional- by registering it as dormant. Dormant organizations have been around for quite a while, with the numbers skyrocketing as of March 2020.
According to numbers from Companies House, approximately 18.5% of organizations in Great Britain don’t do any business all year long. Hence, the Companies House categorizes them as dormant organizations. Perhaps you’re learning about a dormant company for the first time and are wondering how to file dormant company accounts normally. You’ll find every answer you need in this post.
What is a Dormant Company?
A dormant organization is a company that’s not trading and has no other forms of income. Even though a company may have carried out no business during the year, it still needs to present accounts to Companies House. Failure to do so can lead to the House shutting down your organization, potential persecutions, and fines. If your organization is carrying out no business, an option to shut it down is to declare it dormant.
To make it dormant, you should register it as inactive with Her Majesty’s Revenue and Customs (HMRC). If your organization has been traded before or has been active, they will notify you and let you know that you have to complete a Corporation Tax Return for that duration. If you feel that your organization qualifies for a fixed position, you can reach out to the HMRC via telephone or online.
Even after your organization is dormant, there are several responsibilities that you should fulfill as a restricted company director. You must tabulate the following with Companies House:
Annual Accounts - at the finish of the financial year, you’ll need to present accounts to verify there has been no trading.
Annual Confirmation Statement - even when an organization is dormant, you should tabulate a statement to notify Companies House of your organization’s address information and officers.
Reasons to Have a Dormant Company
Many organizations actively trade, but there are more than 300,000 companies registered with Companies House. Dormant organizations benefit from lowered administrative requirements: In effect, they don’t have to offer a similar level of information in their accounts. Here are some good reasons you might opt to have a dormant organization:
It helps protect your reputation and interests as a trader- unless you register as an inactive organization, someone else can create a limited organization with a similar name.
Something is winding up your company.
To set up an organization that you’d like to use in the future. You can open another company while the other one is intact.
You wish to hold a fixed asset such as freehold property.
You’ve decided to lay off trading for a while.
Ways You Can Save Money With Dormant Company Accounts
You Spend Less
Ordinarily, running a business is expensive - from replenishing supplies to ensuring you have the best technology for seamless transactions. You don’t have to worry about overspending (or spending at all) since you have few obligations and expenses. The amount of time your dormant organization account remains active depends on how committed you are to keep it that way.
2. No Penalties
Maintaining a dormant company involves more than telling the HMRC that you’d like to declare your company inactively. As we’ve seen above, you’ll have to file several documents with the Companies House. If you fail to do so, you’ll attract a fine of:
150 Pounds if you file up to a month after the deadline.
375 Pounds if you tabulate between 1-3 months after the deadline.
750 Pounds if you file between 3-6 months.
1,500 Pounds if you tabulate after more than six months.
A dormant company account can not only save you from paying any fines, but it keeps your inactive organization intact as well.
3. You’re the Accountant
The filing obligations of an enterprise owner of an unquoted, including limited organizations or sole traders, are similar to those of quoted organizations, i.e., plc organizations. The three prime reporting needs of organizations are completing a yearly corporate tax return, the confirmation statement, and the filing of company accounts. As the director of your company, you’ll have to do the filing yourself, which helps you save on accounting costs.
4. Free Filing
Aside from the dormant company account filing process being simple, it’s free as well. In case you’re having trouble understanding how it works, you can get all the help you need by consulting the Companies House. Once you’ve carried it out for the first time, it gradually becomes a part of your responsibilities until you decide to make your inactive company active again.
Registering your company as inactive is the best move you can make in this COVID-19 period. Contrary to what most people believe, you lose nothing but gain peace of mind and an active business despite its inactive state. Dormant company accounts are all you need to secure your inactive company. You should, therefore, never make any errors when filing them. We believe you’ve found the money-saving advantages of dormant company accounts above most useful.