The definition of an active company differs between Companies House and HMRC. You will come across this term in various pieces of statutory guidance in the course of running your limited company, so It is worth getting to grips with these different meanings.
Active at Companies House
When a new company is incorporated at Companies House, it immediately becomes ‘active’ in the sense that it comes into existence as a separate legal entity and is ready to start trading at the owner’s earliest convenience.
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A registered company that is not trading is viewed by Companies House as dormant for the purpose of submitting annual accounts.
This means that it is entirely possible for a company to be classified by Companies House as both ‘active’ (because it’s incorporated) and ‘dormant’ (because it’s not trading) at the same time.
Active at HMRC
HMRC considers a company to be ‘active’ if it’s incorporated at Companies House and engaged in some type of business activity or receiving some kind of income. In such instances, a company is active for Corporation Tax purposes, which means that the business must:
- register with HMRC for Corporation Tax.
- deliver a Company Tax Return and full statutory accounts to HMRC every year
- pay Corporation Tax once per year on all taxable income received
Active company requirements for Companies House
Companies House requires all active companies to file annual confirmation statements (previously called ‘annual returns’) and annual accounts every year, even when they are not trading (i.e. dormant)
The confirmation statement (Companies House form CS01) is a document that confirms a company’s registered details at a certain date. This enables Companies House to maintain accurate information on the public register. The information confirmed in the statement includes (where applicable):
- registered company name
- registered office address
- SAIL address (single alternative inspection location)
- directors’ details
- company secretary details
- shareholders’ details (or guarantors’ details if the company is limited by guarantee)
- share capital
- Standard Industrial Classification (SIC) code(s)
- location of statutory records and registers
- people with significant control (PSCs)
Annual accounts are used to report the financial activity of a limited company during its most recent financial year, so all registered companies are required to file accounts at Companies House every year.
Small companies and micro-entities can usually prepare abridged (simpler) accounts for Companies House, whilst all other limited companies that are trading must prepare full statutory accounts.
However, companies that are inactive (dormant/not trading) for Corporation Tax purposes and dormant according to Companies House should file dormant accounts at Companies House, rather than statutory accounts.
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Active company requirements for HMRC
A company that is active for Corporation Tax must register with HMRC online within three months of engaging in any of the following taxable activities:
- buying or selling goods
- buying or selling services
- managing investments
- issuing or receiving dividends from shares
- employing staff and operating payroll (this includes paying a director’s salary)
- leasing or buying property or land
- earning interest
- spending or receiving any money through a business bank account
After registering for Corporation Tax, HMRC will provide deadlines for paying Corporation Tax and filing a Company Tax Return and annual accounts. You may also need or wish to register for VAT.
If your company is not trading and is not active for Corporation Tax, you must contact HMRC’s Corporation Tax office at your earliest convenience to report the inactive trading status of the company. There will be no need for you to prepare tax returns or accounts for HMRC until such time that your company becomes active for Corporation Tax.
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Comments (6)
Can a private limited company set up solely to hold the freehold of a property remain dormant if buildings insurance is purchased in its name ie can the leaseholders arrange to pay the insurance company directly but put the insurance in the company name?
Dear Kathryn,
Thank you for your message.
We are not accountants so cannot advise on matters such as this and would advise that you seek specific advice from an appropriate professional.
Best regards,
1st Formations Team.
what if a limited company is registered as ‘active’ but not trading?
Dear Sir
Thank you for your message.
You do not require to update Companies House as soon as a company becomes inactive. When the company’s next Annual Return is filed, you can choose the SIC Code for a dormant company and this will update Companies House records appropriately.
Kind Regards
What if a company receives a cheque tax refund of for instance £35 after mistakenly paying that amount of money to their corporation tax account. Will it be classed as income?
Hi there,
It should not be classed as taxable income because this money would have been reported as income in your previous accounts and tax return, but you will still need to record the refund to confirm what it is.
If it’s a particular complex issue and you are still unsure, you should speak to an accountant to be absolutely certain.
Best wishes,
Rachel