Q. I incorporated a company in April 2021 but it has not started trading for various reasons and may not do so for another few months. Do I have to submit accounts and a corporation tax return?
A: The important thing to remember with a company is that Companies House and HMRC have different submission dates for accounts and different definitions of 'dormant' and 'active'.
For Companies House, accounts are required whether the business has commenced trading or not. If not, then the accounts to submit are 'dormant' accounts. Companies House considers a company as being 'active' if it has incurred expenditure and nothing else and therefore accounts must be submitted. The first set of accounts will be for the period from incorporation to the end of the month 12 months after incorporation and annually to the same date thereafter.
HMRC require formal accounts where the company:
- has business activity such as a trade even if it has not made any sales;
- has a bank account generating interest, even if none has been received as yet
- manages investments; or
- receives any other income.
When a company is formed, Companies House notify HMRC who will issue a notice to file a Corporation tax return for the 12-month period starting at the date of incorporation. HMRC will also expect a return to cover the remaining days of the accounting period. Even if the company is not 'active' until later, the return must be submitted unless HMRC say otherwise. However, you can contact HMRC and explain that the company is dormant. They will make a note on their file not to expect a tax return until you notify them that the company has become 'active'.
For further information on this topic can be found under the ‘Dormant for Corporation Tax’ section of the government’s website here.
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