Company Formations

Dormant Companies Explained

Catherine BoxallCatherine Boxall
Last updated on:
June 18, 2022
Published on:
March 25, 2022

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It is common for companies to become dormant, either by taking a break from trading or closing their company altogether. In this article we discuss what SIC codes are and how they can be changed if your company becomes dormant. We will also discuss what happens to a dormant company and  your filing and reporting obligations.

What are standard industrial classifications?

A UK Standard industrial classification code (SIC code) is a five-digit business code which describes a company’s economic activities and service activity. These codes help the Office for National Statistics (ONS) track the state and growth of United Kingdom (UK) companies. The condensed UK SIC code list maintained by Companies House is available on the gov.uk website. A private limited company (the most popular type) can have multiple SIC codes. Dormant companies and non-trading companies are also required to have a SIC code.

Your business can have multiple SIC codes if it has multiple business activities. SIC codes can also be updated via an annual confirmation statement if ever the business’ activities evolve or the type of business service expands.

What is a Dormant Company?

A dormant company is a company that has already been through the company registration and incorporation process but it does not carry out business activities in a given period of time. The company does not engage in generating profit, trading activity or provide any services, such as business advice.

If your company is dormant you need to disclose this to Companies House so that the registrar on the companies house website can be updated. When you report your company as dormant you will need to change the company’s SIC code by choosing from the government’s list of SIC codes. For dormant companies, the appropriate SIC code is 99999 and when you submit the next confirmation statement for your company you should update your SIC code.

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What happens to a Dormant Company?

Even though you have reported your company as dormant you will still need to file your confirmation statement (formerly an annual return) and your annual accounts to Companies House and HMRC for corporation tax returns. Different filing rules apply to companies that qualify as ‘small’ and you can check what to include in your accounts.

You are not required to pay Corporation Tax or file another tax return for your limited company once you have notified HMRC of your company’s dormancy unless you are told otherwise.  You must however continue to file your annual accounts and confirmation statements. If you are registered for VAT within 30 days of your company becoming dormant you must deregister for VAT unless you intend to trade in the future and in which case you should send ‘nil’ VAT returns whilst your company is not trading. If you employ staff and do not intend for your company to continue trading in the same tax year you should also close your PAYE scheme.

You can start trading from your dormant company again at any point so that you do not need to set up a new company to carry on the same business activities. This means that when you restart trading your company information will remain the same, such as your company name, its registration numbers, persons of significant control (psc) and company directors. Learn more about restarting your dormant company.

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