Reply to: Dormant company expences

[Lance]

Just because of extra hassle and delays involved rather than getting done what I need to do in first place with the company

The price with them depends on the reserves you have 450(closure, <£25k) or 2000(liquidation, >£25k) + plus accountancy fees till the end of the company year
As I gather on this forum https://www.contractoruk.com/forums/...ancy-fees.html (old post, but probably still indicative) some people are charged as much as 8000 and 2-3000 is considered to be ok...

yeah but I'm assuming that there isn't >£25k in the company if dormancy is being considered.

[Goggy]

if you close it down (it doesn't cost £2k by the way) you can save yourself a load of money by sacking SJD and getting a better accountant as well.
Note that you've just received some very good advice from a professional accountant, for free. So why stick with SJD?

Just because of extra hassle and delays involved rather than getting done what I need to do in first place with the company

The price with them depends on the reserves you have 450(closure, <£25k) or 2000(liquidation, >£25k) + plus accountancy fees till the end of the company year
As I gather on this forum https://www.contractoruk.com/forums/...ancy-fees.html (old post, but probably still indicative) some people are charged as much as 8000 and 2-3000 is considered to be ok...

[Lance]

I am not with SJD

To be honest, I have always received a very good service from my accountant, barring this one bit of misinformation.
But then this where this forum have been a great help, to sanity check this kind of information.

One mistake is not enough for me to just sack them off.

sorry. Must have imagined that.

[MonkeysUncle]

if you close it down (it doesn't cost £2k by the way) you can save yourself a load of money by sacking SJD and getting a better accountant as well.
Note that you've just received some very good advice from a professional accountant, for free. So why stick with SJD?

I am not with SJD

To be honest, I have always received a very good service from my accountant, barring this one bit of misinformation.
But then this where this forum have been a great help, to sanity check this kind of information.

One mistake is not enough for me to just sack them off.

[Lance]

Thats interesting. I was under the impression from my accountant that if the company is dormant I wouldn't need to file annual accounts or the sort.

@Maslins Thank you for this. I will definitely go back to them about this (I am not looking to close it down but good to know for the future).

if you close it down (it doesn't cost £2k by the way) you can save yourself a load of money by sacking SJD and getting a better accountant as well.
Note that you've just received some very good advice from a professional accountant, for free. So why stick with SJD?

[MonkeysUncle]

@MonkeysUncle - have to admit those two options seem negligibly different to me. Sounds like just for (1) the accountant will still do annual submissions for a very modest fee (more regular submissions not required due to de-registration for VAT/PAYE), and for (2) they're saying there's so little to do they'd just leave you to it completely (no fee). You'd still need to file annual accounts and confirmation statement for the latter, but I totally accept they wouldn't be hard to DIY when no trading. Still, it's an ongoing obligation for you, with potentially hefty fines if accounts are late.

Both those options are effectively "in between" the two options I mentioned. I'm not suggesting there's anything wrong with what they've said, I just feel that if you're going to go through the hassle to get to the stage in either of your accountant's suggestions, you may as well go the little further step to close the company too...or on the flip side, if you think you would want to pick up invoicing in the near future at short notice, don't do the PAYE/VAT de-registrations.

Thats interesting. I was under the impression from my accountant that if the company is dormant I wouldn't need to file annual accounts or the sort.

@Maslins Thank you for this. I will definitely go back to them about this (I am not looking to close it down but good to know for the future).

[Hobosapien]

I made a Ltd dormant purely in case the brand (name of the Ltd) was something I wanted to use in future as it had been a plan B that failed.

I also had another Ltd I was using just for contracting that I decided to close when going umbrella, as keeping it dormant offered no advantage as I had de-reg VAT, removed myself from PAYE, closed bank account, so creating a new Ltd for any future contracts would be pretty much the same amount of work, and I wasn't emotionally invested in the company name so drawing a line under it for IR35 and any future tax investigation purposes sealed the decision.

For the dormant company I paid my accountant to do the annual filings but as the company bank account was closed I paid with personal money. They only charged £100 for the annual accounts instead of the usual £500 for an active Ltd.

[Maslins]

@MonkeysUncle - have to admit those two options seem negligibly different to me. Sounds like just for (1) the accountant will still do annual submissions for a very modest fee (more regular submissions not required due to de-registration for VAT/PAYE), and for (2) they're saying there's so little to do they'd just leave you to it completely (no fee). You'd still need to file annual accounts and confirmation statement for the latter, but I totally accept they wouldn't be hard to DIY when no trading. Still, it's an ongoing obligation for you, with potentially hefty fines if accounts are late.

Both those options are effectively "in between" the two options I mentioned. I'm not suggesting there's anything wrong with what they've said, I just feel that if you're going to go through the hassle to get to the stage in either of your accountant's suggestions, you may as well go the little further step to close the company too...or on the flip side, if you think you would want to pick up invoicing in the near future at short notice, don't do the PAYE/VAT de-registrations.

[AR Tax]

When I inquired about this with my accountant I was told there are 2 options:

1) Ceasing trading activities

If you choose to move to a non-trading company, you will need to cancel or transfer any regular payments that are scheduled from your business bank account, for example monthly phone or broadband subscriptions. No further payments should be made from your business account with the exception of:

bank interest and charges
payment of our services
fee payments to Companies House, filing fees
tax payments to HMRC
dividends to shareholders (subject to available profits)
We would also work with you to deregister your company for VAT and close your PAYE scheme where applicable.

Whilst your company is in a non-trading state, your obligations to HMRC and Companies House remain the same:

Year end accounts and a corporation tax return must be filed
A confirmation statement must be submitted to Companies House each year
Any directors will still need to complete a Self Assessment Tax Return
We would continue to work with you to help you meet these obligations.

Our continued service to you

Our non-trading service is 1/4 of the normal monthly fee

Deregistering your company for VAT and Payroll at HMRC
Continued access to our online software to maintain your bookkeeping records
Preparation and filing of year end accounts and Corporation Tax Return
Continued support with our software and questions relating to recommencement of trade
We would still be able to provide you with support with other matters e.g. reference letters, advice on accounting or tax etc however, we may need to provide you with a separate quote before we undertake any work.

2) Making your company dormant

If non trading is not the right option for you, you can change your company's status to dormant at Companies House. If you were to proceed with this option, we would be able to deregister your company for VAT and PAYE at HMRC for a one off fee.

However, if you were to choose this option we would be unable to support you after your company had been made dormant. This is because a part of this process is closing your company's Business Bank Account, which would mean you were unable to pay our fees.

Interesting how your accountant appears to be saying you can't claim business mobile (even though this is a common overhead that will help you get a new contract) but are happy for you to continue to claim their accountancy fees! Seems a bit inconsistent. I would double check if this is correct.

This can be the problem with emails. Sometimes you just get a template reply that hasn't been tailored to your situation or updated for any corrections.

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[MonkeysUncle]

When I inquired about this with my accountant I was told there are 2 options:

1) Ceasing trading activities

If you choose to move to a non-trading company, you will need to cancel or transfer any regular payments that are scheduled from your business bank account, for example monthly phone or broadband subscriptions. No further payments should be made from your business account with the exception of:

bank interest and charges
payment of our services
fee payments to Companies House, filing fees
tax payments to HMRC
dividends to shareholders (subject to available profits)
We would also work with you to deregister your company for VAT and close your PAYE scheme where applicable.

Whilst your company is in a non-trading state, your obligations to HMRC and Companies House remain the same:

Year end accounts and a corporation tax return must be filed
A confirmation statement must be submitted to Companies House each year
Any directors will still need to complete a Self Assessment Tax Return
We would continue to work with you to help you meet these obligations.

Our continued service to you

Our non-trading service is 1/4 of the normal monthly fee

Deregistering your company for VAT and Payroll at HMRC
Continued access to our online software to maintain your bookkeeping records
Preparation and filing of year end accounts and Corporation Tax Return
Continued support with our software and questions relating to recommencement of trade
We would still be able to provide you with support with other matters e.g. reference letters, advice on accounting or tax etc however, we may need to provide you with a separate quote before we undertake any work.

2) Making your company dormant

If non trading is not the right option for you, you can change your company's status to dormant at Companies House. If you were to proceed with this option, we would be able to deregister your company for VAT and PAYE at HMRC for a one off fee.

However, if you were to choose this option we would be unable to support you after your company had been made dormant. This is because a part of this process is closing your company's Business Bank Account, which would mean you were unable to pay our fees.

[Maslins]

I think there's a fair bit of confusion over what dormancy means.

If you stop invoicing for 6 months, that doesn't in itself mean your company is dormant. HMRC will still expect monthly payroll, quarterly VAT, annual accounts/CT etc. In reality the filing responsibilities (hence typically accountancy fees) don't reduce much.

You can potentially de-register your company as an employer and/or for VAT. This is a bit more work in the short term to do those. It does however then mean you don't have to file monthly payroll/quarterly VAT. It does also mean if you want to start invoicing again, with VAT, and take a salary, that you need to re-register as an employer and for VAT.

Even if you de-register for all company taxes and officially make your company fully dormant, as a minimum you'll still need to file annual accounts and confirmation statement with Companies House.

Also worth highlighting at least as things stand, FreeAgent can cope with a company registering for VAT, and de-registering for VAT, but it can't currently cope with a company then re-registering for VAT.

So in practice we feel any attempts at dormancy for maybe 6-12 months aren't worthwhile. We'd recommend either:
1) keeping things ticking over fully. On the plus side then you can very quickly restart invoicing as/when you want. On the down side even while you're not invoicing you've got regular filings to do, hence likely accountancy fees.
2) close it down. On the plus side, reduces/eliminates long term filings, hence accountancy costs, plus possibly tax breaks upon closure. On the down side, more short term effort, plus may then require a new company set up with all accompanying registrations later.

If you expect <12 months without invoicing, we'd suggest the former. If you expect >12 months without invoicing, we'd suggest the latter.

[Goggy]

WHat is the result you're trying to achieve?

I wasn't trading recently and I won't be looking for another contract in the next 6 months, but there are chances that I will after that.
So
a) I can make the company dormant thus wil be able to quickly make it active when needed + relatively low accountancy fees over that period
b) I can close the company, but that means liquidation that 1) costs 2000+VAT 2) takes a few months 3) It'll take longer to create new company (as needs not only formation, but all the other bits too: new accountancy, vat registration, new domain etc)

So going via dormant company route seems a better option, but due to the precarious situation re fees&charges, I'm not sure if to proceed

[Lance]

Thank you. I'm considering making it dormant as I might resume trade in 1/2 -1 years. I use SJD.

Just close the company. Sack SJD.
And if you want to start again use a better accountant. It takes a day or two to open a new company and think of the 1 year accountancy saving.

[Lance]

Thank you, but if I follow the link you've provided, it says:
"Your company or association may be ‘dormant’ if it’s not doing business (‘trading’) and doesn’t have any other income, for example investments."
I don't see anything that explicitly says that expenses are not allowed ..

I know. That's why I asked if you'd want tp pay expenses given that you cannot claim any tax back as a loss. Or VAT.
You can make it dormant, and still pay your accountant but I don't understand WHY. WHat is the result you're trying to achieve?

[AR Tax]

Thank you. I'm considering making it dormant as I might resume trade in 1/2 -1 years. I use SJD. Their position is that accountancy fees & bank charges are allowed for a dormant company, but I don't find any proof to that. If I don't trust this advice, I can try to change the accountancy, but not sure:
a) if that makes sense at this point
b) how the other accountancies handle dormant companies (most probably they are charging some fee for that too..)

Send them the link to this thread or the Gov.uk link about dormant companies not being allowed to have significant transactions (accountancy and bank charges are not listed as non-significant) and see what they say.

Ask them if they will carry back any loss incurred on accountancy and bank charges to the previous accounting period in order to claim a corporation tax refund.

If you are continuing to look for contracts and expect to secure one in the next 6 - 12 months it sounds like your company is probably not dormant.

By now you probably understand your company won't be dormant because it will have significant transactions and is still trying to trade. So what are you trying to get out of mistakenly calling your company dormant? Is it to secure a lower accountancy fee? If you are trying to secure a lower accountancy fee, why not ask them about a lower accountancy fees rather than dormancy?

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