What is a dormant company?
The term "dormant company" has two distinct legal definitions in the UK, and understanding both is important. They come from different regulatory bodies and have different implications.
Companies House definition
Under the Companies Act 2006, a company is dormant if it has had no "significant accounting transactions" during its financial year. This means no money has come in or gone out — with narrow exceptions: shares can be issued on incorporation (e.g., one £1 share) without making the company active. Filing fees paid to Companies House are also exempt. Any other transactions — no matter how small — would take the company out of dormant status for Companies House purposes.
HMRC definition
HMRC defines a dormant company as one that is not "active" for Corporation Tax purposes. This means the company is not trading, not receiving income (including investment income), not selling assets, and not making distributions. A company can be dormant in HMRC's eyes even if it has some minor accounting transactions that would make it "active" under Companies House's stricter definition. When HMRC accepts that your company is dormant, you are not required to file Corporation Tax returns for dormant periods.
In practice, most small company owners treat their company as dormant when it is genuinely not doing anything — no invoicing, no sales, no purchases, no employees. If in doubt, consult an accountant to ensure you satisfy both definitions.
Why keep a company dormant?
There are several legitimate and practical reasons why someone might choose to keep a company registered but dormant rather than dissolving it:
1. Protect a company name
Once your company is registered, its name is protected — no other company can register the same name. If you have a strong brand name you want to reserve for future use, keeping a dormant company is the most reliable way to protect it. This is far cheaper than trademark registration and is instantly effective.
2. Pause trading temporarily
Sometimes business owners need to step back — illness, family circumstances, a sabbatical, or difficult market conditions. Rather than dissolving the company and losing its history, credit record, and name, keeping it dormant allows you to resume trading when circumstances change.
3. Hold a name for a future venture
You may have a business idea that you are not ready to execute yet. Registering a company now (at £0 via Tide) and keeping it dormant protects the name while you develop your plans.
4. Special Purpose Vehicle (SPV)
Investors and developers sometimes register companies to hold for a specific future transaction — a property purchase, a joint venture, or a future acquisition. The company sits dormant until the transaction is ready to proceed.
5. Preserve trading history and credit record
A company with several years of registered history (even if dormant for part of that time) can present better to suppliers, lenders, and clients than a brand new entity. Some businesses prefer to keep a dormant company alive so they can show a longer incorporation history when they resume trading.
Your legal obligations as a dormant company
Being dormant does not mean you can ignore the company. You still have legal obligations at Companies House. The key distinction is between what you must still do and what you no longer need to do:
You MUST still:
You do NOT need to:
Important: Dormant company accounts are significantly simpler than full statutory accounts — they consist of a Balance Sheet only (no Profit and Loss account required). They can be prepared and filed for free using the Companies House online filing service, or through most accountancy software.
How to tell HMRC your company is dormant
Once your company becomes dormant, you should notify HMRC as soon as possible. This stops HMRC from expecting Corporation Tax returns and avoids unnecessary correspondence and potential late filing penalties.
- 1Log in to your HMRC online account (or use the HMRC online service for Corporation Tax)
- 2Notify HMRC that your company is dormant and provide the date from which it became dormant
- 3HMRC will update their records and stop issuing Corporation Tax notices to file for dormant periods
- 4Keep records of the dormancy notification and the date the company became dormant
- 5If the company starts trading again, notify HMRC within 3 months of becoming active
HMRC may still contact your company periodically to confirm its dormant status. Respond to any such communications to avoid your company being treated as active. If you are unsure about the process, an accountant can handle the HMRC notification on your behalf — this is typically a quick and inexpensive task.
Dormant company vs dissolved company
These are two fundamentally different states. Understanding the distinction is critical before making a decision about what to do with a company you are no longer actively using:
| Factor | Dormant Company | Dissolved Company |
|---|---|---|
| Legal existence | Still exists as a legal entity | No longer exists |
| Companies House register | Still on the register | Removed from the register |
| Name protection | Name is protected | Name freed up for others to use |
| Can resume trading | Yes — notify HMRC and start | No — requires formal restoration |
| Annual obligations | Yes — CS and dormant accounts | None (company doesn't exist) |
| Assets | Company owns its assets | Assets vest in the Crown |
| Bank account | Can retain bank account | Bank account closed on dissolution |
Costs of keeping a company dormant
Keeping a company dormant has a modest but real ongoing cost. Here is what to budget:
The only mandatory charge payable to Companies House.
Free if you file yourself via Companies House online. Accountant fees vary — typically £50–£300 for a straightforward dormant company.
If you use your home address, it's free but your address is public. Commercial registered office services typically cost £30–£120/year.
Minimum annual cost: £34/year (if you file everything yourself and use your home address as registered office).
Compare this to formal dissolution: striking off a company using form DS01 costs £33 — a one-time fee. But once dissolved, the company is gone. If you later decide you want it back, administrative restoration costs £468 in government fees alone, plus professional fees.
The decision between dormancy and dissolution comes down to how certain you are that you will never need the company again, and how valuable the name protection is to you.
Related guides
Frequently asked questions
What is a dormant company in the UK?
A dormant company is a company that is not currently trading or carrying on any business activity. There are two separate definitions: Companies House considers a company dormant if it has had no "significant accounting transactions" during its financial year (i.e. no money in or out, apart from specific exceptions like the initial share issue). HMRC considers a company dormant for Corporation Tax purposes if it is not active — meaning it is not trading, receiving income, or making investments. A company can be dormant under one definition and not the other, so it is important to consider both.
Do I still need to file accounts for a dormant company?
Yes. A dormant company still has annual filing obligations at Companies House. You must file dormant company accounts (a simplified Balance Sheet — no P&L required) and an annual Confirmation Statement (£34 fee). Dormant company accounts are much simpler than full accounts and can be prepared and filed for free using Companies House's online filing service. You must also notify Companies House of any changes to directors, registered office, or other details during the year.
How do I make my company dormant?
To make your company dormant with Companies House, simply stop all trading activity and ensure there are no significant accounting transactions. You should notify HMRC that your company is dormant using the online Corporation Tax service (using the form CT41G reference or the HMRC online account). Keep records of the date the company became dormant. You will still need to file dormant accounts and Confirmation Statements annually. If you start trading again, you must notify HMRC within 3 months.
Can a dormant company have a bank account?
Yes, a dormant company can have a bank account. Under Companies House's definition, a dormant company is one with no "significant accounting transactions" — and a bank account with a nil or unchanged balance would not trigger this. However, if the account receives interest or any transactions occur, the company would no longer be dormant in Companies House's terms. For HMRC purposes, simply having a bank account does not make a company active — the company would need to be trading or receiving income.
What's the difference between a dormant company and a dissolved company?
A dormant company still exists as a legal entity on the Companies House register. It has ongoing obligations, its name is protected, and it can resume trading at any time. A dissolved company has been removed from the register entirely — it no longer exists as a legal entity, its name becomes available for others to register, it has no ongoing obligations (because it doesn't exist), and it cannot resume trading without a formal restoration process. Dissolution is permanent unless reversed through court-ordered or administrative restoration, which is expensive and complex.