Is my company dormant or active?

[kembljoe]

Hi,

I already have an 'active' company. (Co1)

I have just created another company(Co2) and opened a company bank account as well.

So far, I have not credited or debited any money (balance=0) from Co2. I am planning to lend some money from Co1 to Co2 in a few days, but in the next 1 month, no more transactions. Just a loan from Co1 to Co2 to use as an investment in the near future. But until that time, the money will reside in Co2's company bank account with no more transactions.

During this time (getting loan from Co1 till starting trading), will HMRC treat Co2 as a dormant company or active company?

Regards.

[Martin at NixonWilliams]

Hi,

I already have an 'active' company. (Co1)

I have just created another company(Co2) and opened a company bank account as well.

So far, I have not credited or debited any money (balance=0) from Co2. I am planning to lend some money from Co1 to Co2 in a few days, but in the next 1 month, no more transactions. Just a loan from Co1 to Co2 to use as an investment in the near future. But until that time, the money will reside in Co2's company bank account with no more transactions.

During this time (getting loan from Co1 till starting trading), will HMRC treat Co2 as a dormant company or active company?

Regards.

The company is likely to be seen as dormant but this could change if the money begins earning interest. The company would be receiving investment income and could be seen as an active investment company.

To avoid any complications do not transfer the funds until they are needed, i.e. when Co2 is ready to begin trading.

[northernladuk]

Erm, could I ask exactly why you are wanting to do this? Have you passed this by an accountant, warts and all, to make sure you are doing this right? Isn't this a lot more complicated than on face value. Thinks like a change in your company's main trade i.e. to investment, loans to connected companies and all sorts?

I have a feeling an answer to a question put as simply as this won't cover everything you need to know.

[Jessica@WhiteFieldTax]

Endorsing NLUKs response, more information needed really. Being "dormant" (a) doesn't in itself give a lot of benefit and (b) is often misunderstood.

If the company hasn't had, ever, any accounting transactions, other than share issue, you can file a shortened set of dormant accounts at Companies House. Otherwise they need normal abbreviated accounts.

In terms of HMRC if there is nothing taxable then you can get them to cease issuing annual CT600 (Corporation Tax Self Assessment) requests, not register for/de register from vat, paye etc.

If NewCo will be making its investment shortly, say before financial year end, then its active not dormant. I suspect the question really is does this mean I need to do accounts/vat/paye/corporation tax - really you ned to talk to your accountant abut that, and about associated company issues.

HTH