Non trading 2018

[iburnell]

After IR35 I had to go on client Payroll April 2017 so I contracted/billed for Jan-March in 2017. My accounted billed me about £500 at Year end (31/12) to do the accounts

This year I haven't traded at all. I was contacted by my accountant last week (who I guess I should not name!), saying that they want to put me onto a monthly fee of £52 + vat. I said that this seems a lot of money for a non-trading company and was effectively told if I didn't sign onto the monthly scheme I would have to leave - not very impressed !

I have been considering closing my company anyway at Year end as I seem to be making a lot more money working under client payroll, but what options do I have with my coming Year End?. Clearly I have to submit account but as I say the only expenses out of the company are a £5 per month bank account charge and the companies house payment in November nothing else - isn't there such a thing a dormant accounts ?

[Jessica@WhiteFieldTax]

“dormant accounts” is quite a technical definition and once a company has had a period of trading its hard, although not impossible, to get to dormant status under company law.

What’s mostly referred to as “dormant” colloquially is more “nothing-significant-happening-this-is-straightforward”

£50/m is ridiculous. For someone who was a full service client and isn’t using the company my firm charges £120+vat pa, although directors Self Assessment isn’t in that. I think that’s market rate ish. Even with a SA return done separately it’s not £50m.

[Maslins]

Sort of saying what Jessica said, but many people seem to be very confused about company dormancy.

A contractor going 6 months between contracts, where they potentially do a bit of travelling whilst keeping the company ticking over...this is not a dormant company. This is one where payroll/VAT will still need to be filed monthly/quarterly, and statutory accounts, CT return, personal tax return annually. Basically your turnover dropping for a while makes virtually no different to the work involved.

If you properly cease trading, de-register as an employer, de-register for VAT, do final trading accounts & CT return and settle all relevant liabilities...then don't trade at all for at least a year, that is a dormant company. Realistically if you go to all this effort, then it normally makes sense to take things one step further and actually close the company. To my mind the only reason people want to keep it open is some kind of irrational emotional attachment to their company. In our view a dormant company isn't really a thing when it comes to contractors.

OP - for your situation, just close it would by my view.

[iburnell]

Ok, thanks. So forget the words dormant if I chose to keep the company open just in case I need to go back to contracting how much should I be paying to do the Year end accounts?

[Jessica@WhiteFieldTax]

If the company hasn’t traded in the year, then £200 tops.

[LondonManc]

With reference to VAT, you're supposed to deregister when you're sure you won't hit the VAT threshold for the year.

"You must cancel within 30 days if you stop being eligible or you may be charged a penalty. You can ask HM Revenue and Customs ( HMRC ) to cancel your registration if your VAT taxable turnover falls below the de-registration threshold of £83,000."

VAT registration: Cancel registration - GOV.UK

[Maslins]

Ok, thanks. So forget the words dormant if I chose to keep the company open just in case I need to go back to contracting how much should I be paying to do the Year end accounts?

My point wasn't to be pedantic over the use of the word dormant, but to distinguish between two very different situations.

If your company has de-registered for VAT and as an employer, and following that goes a whole year with no transactions, something like £100+VAT.

If you want to be able to revert to contracting at short notice, then you may well not want to de-register for VAT/as an employer. If you keep both those open, that's a lot of submissions still. An accountant may offer a modest discount, but probably nothing too significant.

@LondonManc don't think there's anything wrong with remaining VAT registered if you're intending to make taxable supplies again in the future. Otherwise every contractor might need to de-register then re-register every time they have a bit of "bench time".

[MonkeysUncle]

Being in the same boat I am looking at making my LTD dormant as it looks like I will be using a brolly for the better part of a year (if not longer).
My accountant is charging me £20+ VAT a month.

Something has occurred to me, I have emailed my accountant but I might get a quicker response here:

Lets say my LTD is dormant for a year and then I start using it again. The following year I want to apply for a mortgage.
Has the company been running for 1 year (since being made live again) or for 5 years (since the time is was first created?)

[Hobosapien]

Lets say my LTD is dormant for a year and then I start using it again. The following year I want to apply for a mortgage.
Has the company been running for 1 year (since being made live again) or for 5 years (since the time is was first created?)

Depends on what criteria is being applied for assessing mortgage affordability. If requiring several years of accounts it doesn't matter if dormant or not if there's not sufficient trading activity and profit to support the income required.

In tricky situations like this it makes sense to use a contractor specialist mortgage broker who can assess the best option for your circumstances, which may be to use the current contract rate rather than self-employed style x years proof of income.

I am in a similar boat having been contracting via a brolly for over a year and am now in the process of closing my Ltd to draw a line under it and remove associated costs and hassle that is only going to get worse with HMRC's 'making tax digital' changes from next year.

I can open a new one if makes sense in the years to come once IR35 and private sector impact established as far as how likely and hassle free is it to be to contract via a Ltd in the near future. I may just work inside IR35 and chase higher rate to compensate. Fewer sleepless nights and looking over the shoulder for HMRC retrospectively.