Dormant Company Filed Accounts
All limited companies, whether they trade or not, must deliver accounts to Companies House. However, a company is dormant if it has had no ‘significant accounting transactions’ during the accounting period. A significant accounting transaction is one which the company should enter in its accounting records. Dormant companies may claim exemption from audit in accordance with section 480 of the Companies Act 2006.
When determining whether a company is dormant you can disregard the following 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 reregistration of a company and filing confirmation statements or annual returns
- payment of a civil penalty for late filing of accounts
Requirements a dormant company must comply with to claim audit exemption
A dormant company is exempt from having an audit for that financial year if:
- it has been dormant since its formation or
- it has been dormant since the end of the previous financial year and it meets the following conditions:
- it is entitled to prepare individual accounts in accordance with the small companies regime
- it is not required to prepare group accounts
- it qualifies as a ‘small company’ in relation to that year, or would have qualified as small but for the fact that it is a public company or is a member of an ineligible group
Other exemptions available to dormant companies
A dormant company that is also a subsidiary may, in certain circumstance claim exemption from the preparation and/or filing of its accounts as detailed in the section of this guidance on the dormant subsidiary exemption.
Entities that cannot claim exemption from audit as a dormant company
A company may not take advantage of the dormant company audit exemption if at any time in the financial year in question it:
- is a public company unless the company is dormant
- is an authorised insurance company, a banking company, an e-money issuer, a MiFID (ie Markets in Financial Instruments Directive) investment firm or a UCITS (i.e.Undertakings for Collective Investment in Transferable Securities) management company;
- carries on insurance market activity
Nor can a company take advantage of the dormant company audit exemption if an audit is required by a member or members holding at least 10% of the nominal value of issued share capital or holding 10% of any class of shares; or – in the case of a company limited by guarantee – 10% of its members in number. The demand for the accounts to be audited should be in the form of a notice to the company, deposited at the registered office at least one month before the end of the financial year in question. The notice may not be given before the financial year to which it relates.
Contents of dormant company accounts
Dormant company accounts submitted to Companies House need not include a profit and loss account or directors’ report. Unaudited dormant accounts are much simpler than those of a trading company but must contain:
- a balance sheet containing statements above the director’s signature and their printed name to the effect that the company was dormant throughout the accounting period
- 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
The right to prepare a dormant balance sheet for filing at Companies House does not affect the company’s obligations to prepare full accounts for its members.
Requirements that a dormant company must comply with to claim audit exemption
When submitting accounts to Companies House on paper, they must check that they have the following statements above the director’s signature and printed name:
- For the year ending ………………………. (dd/mm/yyyy) the company was entitled to exemption from audit under section 480 of the Companies Act 2006 relating to dormant companies.
- The members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476
- The directors acknowledge their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts
A private company that qualifies as small should also include the following statement on the balance sheet:
- These accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies’ regime
Accounts submitted online have inbuilt checks which will prevent common errors and omissions of the necessary statements.
Standard form for dormant accounts
WebFiling offers a simple web form enabling easy and quick electronic submission of dormant accounts for companies that have never traded. This is now available for both companies limited by shares and companies limited by guarantee. These contain inbuilt checks so they can be sure they haven’t omitted any key information.
Deadlines to submit dormant accounts to Companies House
They have the same time allowed for filing as for other accounts, and the same penalties for late filing apply.
Dormant companies that start trading again
The company will cease to be exempt from audit as a dormant company if it:
- begins commercial or trading activities during the financial period
- would no longer qualify for some other reason, e.g. because there have been significant accounting transactions that need to be entered in its accounting records
If either of these happened, they might have to submit full accounts for the financial year in which the company ceased to be exempt, and the directors might need to appoint auditors for the company. However, it may be that the company would qualify for exemptions as a small company.
Dormant subsidiary exemption from the preparation and/or filing of accounts
If a subsidiary company is dormant throughout the financial year and its parent undertaking is established under the law of an EEA state then they may be able to claim exemption from the preparation of their accounts under section 394A of the Act or from the obligation to deliver accounts to Companies House under section 448A of the Act. This applies to accounting periods ending on or after 1 October 2012. Any accounts ending before that date must still prepare and file accounts.
The exemption from preparation (section 394A) also covers the requirement to file accounts and so a company that has claimed this exemption does not also need to claim exemption from filing (under section 448A).
Conditions for a dormant subsidiary to claim exemption from the preparation and/or filing of its accounts
To take up either of these exemptions the company must have been dormant throughout the financial year and its parent is established under the law of an EEA state. They will also need to deliver the following documents to Companies House, before the date on which the accounts are due:
- a written notice of agreement by all members of the subsidiary company that they consent to the exemption in respect of the relevant financial year
- a statement from the parent undertaking that it guarantees the subsidiary under section 394C (for exemption from preparation) or 448C (for exemption from filing) of the Companies Act 2006 in respect of the relevant financial year
- a copy of the parent undertaking’s consolidated accounts including a copy of the auditor’s report and the annual report on those accounts
- the subsidiary must be included in the consolidated accounts for the relevant financial year or to an earlier date in the same financial year. The parent undertaking must disclose in the notes to their consolidated accounts that the subsidiary is exempt from the requirements to prepare individual accounts under section 394A, or to file individual accounts under 448A of the Companies Act 2006
- the agreement and the parent’s consolidated accounts must show the subsidiary company’s name and registered number in a prominent place on the document
- these exemptions are only available if your company’s financial year ends on or after 1 October 2012. If your company’s financial year ends before then, you will still have to prepare and file accounts by the deadline.
Information that must be included in the submission
The statement must include the following information:
- the registered name and number of the subsidiary
- the subsidiary’s financial year to which the guarantee relates
- the statement date
- details of the section of the Companies Act 2006 under which the guarantee is being given:
- section 394c – exemption from preparing accounts for a dormant subsidiary
- section 448c – exemption from filing accounts for a dormant subsidiary
- section 479C – audit exemption for a subsidiary undertaking
- if the parent was incorporated in the UK its registered name and registered number (if any)
- if the parent was incorporated and registered (in the same country) elsewhere in the EEA, its registered name, registration number and the identity of the register where it is registered
Effect of the guarantee and when it takes effect
The guarantee has the effect that the parent undertaking guarantees all outstanding liabilities that the subsidiary is subject to at the end of the financial year. The guarantee takes effect when it is delivered to the registrar and remains in force until all of the liabilities have been satisfied.
Entities that cannot claim exemption from preparation and/or filing of accounts as a dormant company
A dormant subsidiary is not entitled to the exemption if it was at any time within the relevant financial year:
- a quoted company
- a company that:
- is an authorised insurance company , a banking company, an e-Money issuer, a MiFID investment firm or a UCITS management company
- carries on insurance market activity
- a special register body as defined in section 117(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (c 52) or an employers’ association as defined in section 122 of that Act or Article 4 of the Industrial Relations (Northern Ireland Order 1992 (S.I. 1992/807 (NI 5)