Dormant Company

What is a dormant company? (Source Comapnies House website)

A company is dormant if it has had no 'significant accounting transactions' during the period.

• For accounting periods ending on or after 26 July 2000,when considering if a company is dormant you can disregard the following financial transactions:
• payment for shares taken by subscribers to the memorandum of association;
• fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns;
• and payment made in respect of civil penalties imposed by the Registrar of Companies for delivering accounts to the Registrar after the statutory time allowed for filing.
• For accounting periods ending before 26 July 2000, only payment for shares taken by subscribers to the memorandum of association may be disregarded.

A company may not take advantage of the dormant company audit exemption if it is:

• a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity;
• a person who carries on insurance market activity.
• If the company has not been dormant since incorporation, but has become dormant, it may take advantage of the exemptions provided that:
• it has been dormant since the end of the previous financial year; and
• it does not have to prepare group accounts for that year; and
  it qualifies as a 'small company' in relation to that year (see chapter 3), or would have qualified as small but for the fact that it is:
• a public company; or
  a member of a group of companies which included: a public company, a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity, or a person who carries on insurance market activity.

Audit exemption for dormant companies

What exemption is available?

Dormant companies can claim exemption from audit and need only prepare and deliver to Companies House an abbreviated balance sheet and notes. A profit-and-loss account and directors' report do not have to be included in dormant company accounts filed at Companies House but a directors' report must be provided to members.

 

What information dormant company accounts must contain?

• Dormant accounts filed at Companies House need not include a profit-and-loss account or directors' report. Model balance sheets are shown at the end of this chapter.
• Unaudited dormant accounts are much simpler than those of a trading company but must show:
• An abbreviated balance sheet containing statements above the director's signature to the effect that the company was dormant throughout the accounting period. The full text of the required statements is as question 4 below or, for financial years ending before 26 July 2000, at question 5 below);
• Any previous year's figures for comparison - even though there are no items of income or expenditure for the current year;
• Certain notes to the balance sheet - a full list of items to be covered appears at the end of this chapter.

What statements are needed on the balance sheet?

For financial years ending before 26 July 2000, see question 5.

For accounts in respect of financial years ending on or after 26 July 2000 the following statements must appear above the director's signature:

(a) For the year ended . . . (date) the company was entitled to exemption under section 249AA(1) of the Companies Act 1985.

(b) Members have not required the company to obtain an audit in accordance with section 249B(2) of the Companies Act 1985.

(c) The directors acknowledge their responsibility for:
ensuring the company keeps accounting records which comply with section 221; and preparing accounts which give a true and fair view of the state of affairs of the company as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the company.
If the company chooses, it may deliver the un-abbreviated accounts prepared for its members. The same statements must appear on the un-abbreviated balance sheet.

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