Dormant company paying dividends?

[freeplatypus]

Well, that depends whether you mean Dormant in the strict sense of meeting Companies Act, or a more colloquial not actively doing anything status.

TBH dormancy under the Companies Act doesn't achieve much of any value - slightly simpler accounts format. Its roots are in the days when all companies needed a statutory audit, which ended early 1990s.

The more practical benecit is in being able to exempt yourself from HMRC CT600 / ibxrl, and HMRC don't work on the strict interpretation of dormancy that Companies House do - in essence you are dormant for HMRC taxes if there is nothing that generates a tax bill.

Thanks for explanation. That makes much sense now.

[Jessica@WhiteFieldTax]

Hi Jessica,

Thank you for response. I did small research and based on Companies House documents any financial transaction (with exception of 3 types) is likely to cause loss of dormant status. I found on some other forum/website suggestion that bank account should be closed as any transaction (even bank fee or interests) can be treated as financial transaction invalidating dormant status.

Well, that depends whether you mean Dormant in the strict sense of meeting Companies Act, or a more colloquial not actively doing anything status.

TBH dormancy under the Companies Act doesn't achieve much of any value - slightly simpler accounts format. Its roots are in the days when all companies needed a statutory audit, which ended early 1990s.

The more practical benecit is in being able to exempt yourself from HMRC CT600 / ibxrl, and HMRC don't work on the strict interpretation of dormancy that Companies House do - in essence you are dormant for HMRC taxes if there is nothing that generates a tax bill.

[Jessica@WhiteFieldTax]

How can you make your company dormant, close your bank account (to stop banking fees) and still pay divs? Where will the cash be held for the company to pay divs, if not in a bank account? I've wondered this before.

Good point, I was reading OP question as wanting to pay down bank account by dividend then close it.

[freeplatypus]

You didn't say in your original post that you wanted the company to _stay_ dormant....

My fault, made wrong assumption that this would be implied.

[freeplatypus]

How can you make your company dormant, close your bank account (to stop banking fees) and still pay divs? Where will the cash be held for the company to pay divs, if not in a bank account? I've wondered this before.

Apologies, I should have been clearer by stating that these questions are not connected in any way. I did not want to open new thread for each question.

[Whorty]

Hi Jessica,

Thank you for response. I did small research and based on Companies House documents any financial transaction (with exception of 3 types) is likely to cause loss of dormant status. I found on some other forum/website suggestion that bank account should be closed as any transaction (even bank fee or interests) can be treated as financial transaction invalidating dormant status.

How can you make your company dormant, close your bank account (to stop banking fees) and still pay divs? Where will the cash be held for the company to pay divs, if not in a bank account? I've wondered this before.

[meridian]

You didn't say in your original post that you wanted the company to _stay_ dormant....

[freeplatypus]

Yes, dividends can be paid whilst dormant.

No, there is no obligation to retain a bank account whilst dormant.

Hi Jessica,

Thank you for response. I did small research and based on Companies House documents any financial transaction (with exception of 3 types) is likely to cause loss of dormant status. I found on some other forum/website suggestion that bank account should be closed as any transaction (even bank fee or interests) can be treated as financial transaction invalidating dormant status.

[Jessica@WhiteFieldTax]

Hi all,

It is possible/legal for dormant company to pay its director(s) dividends?

Also, should company go dormant and end-up with empty bank account (no tax obligations - except for filing) does it still need bank account?

Cheers

Yes, dividends can be paid whilst dormant.

No, there is no obligation to retain a bank account whilst dormant.

[freeplatypus]

Hi all,

It is possible/legal for dormant company to pay its director(s) dividends?

Also, should company go dormant and end-up with empty bank account (no tax obligations - except for filing) does it still need bank account?

Cheers