Companies House informs HMRC when a new company is registered, so there is no need for you to contact them yourself. Shortly after company formation, HMRC will post a letter to your registered office address, which will include your company’s Unique Taxpayer Reference (UTR) and information about Corporation Tax.
The UTR is very important because you will need to provide it whenever you contact HMRC about your company’s tax affairs. The letter will explain everything you need to know about your company becoming ‘active’ for corporation tax, including the information that you are required to provide to HMRC.
If you are not planning to start trading immediately, you should contact your local corporation tax office to tell HMRC that your company is dormant. We will discuss dormant company requirements in more detail at the end of this article.
How and when to register for corporation tax
If your company is active (trading) it will be liable for corporation tax on all taxable income. A company is considered active for corporation tax purposes when:
- It carries on any trading or professional business activity.
- Goods and services are bought and sold with a view to making a profit or surplus.
- Income is received.
- Interest is earned.
- It manages investments.
- Staff are employed.
You must register with HMRC for corporation tax purposes, online or in writing, within 3 months of starting any business activity. If you register online, your company will be automatically enrolled for corporation tax online. During the registration process, you will be asked for your company registration number (CRN) and your UTR.
You will be required to set up a Government Gateway account at this time. This is necessary for registering your business for all types of taxes, signing up for any other HMRC online services, and paying your company taxes online.
Once you have set up your Government Gateway account, simply follow the online instructions and provide HMRC with the following statutory information:
- The date you started trading.
- Company name and registration number.
- The address of your main place of business (not your registered office address, unless this is where your main business activities are carried out).
- The nature of your business activities.
- The date to which you intend to prepare your statutory accounts. This will be the default accounting reference date (ARD) provided by Companies House.
HMRC will use this information to work out your corporation tax accounting period. Within seven days of your registration being verified by HMRC, you will receive an Activation Code (or PIN) at your registered office address. You should activate your online services as soon as you get this code because it’s only valid for a short period of time.
Paying corporation tax and filing company tax returns
Active companies are required to pay corporation tax 9 months and 1 day after the end of each accounting period. Typically, an accounting period is 12 months long and will match your 12-month financial year. Company Tax Returns should be filed online 12 months after the end of your accounting period.
Inform HMRC if your company is not trading (dormant)
If your company is inactive (not trading), it will not be liable for corporation tax. You will not be required to register with HMRC for corporation tax or file a tax return whilst it remains dormant. Instead, you must contact your local corporation tax office in writing to inform HMRC that your company is dormant. If it was previously active, you will be asked to submit a Company Tax Return and pay corporation tax for the period of business activity.
If your company has never traded, you should state the date of incorporation as the date it became dormant. Within approximately 15 days, you should receive notification from the tax office to confirm your dormant status. You should not have to contact HMRC again until you begin trading.
Very nice post. I just stumbled upon your blog and wanted to say that I’ve really enjoyed browsing your blog posts. In any case I’ll be subscribing to your feed and I hope you write again soon!
Thanks for your kind words, we’re glad you are enjoying our blog articles.
Kind regards,
The Rapid Formations Team
hello,
i recently launched a limited company over a week ago which means i haven’t received my unique taxpayer reference (UTR) yet does this mean i am unable to begin trading until i have registered for corporation tax or am i able to start trading and when i receive my UTR then register for corporation tax.
this has been bugging me for a while and i just need clarification on whether i should wait until i have my UTR and register for tax before i begin trading or if im able to begin trading while waiting for the UTR
cheers
Thank you for your kind enquiry, Dylan.
You can start trading up to 3 months prior to informing HMRC that you need to register for Corporation Tax.
In the scenario you have described, you may start trading straight away and inform HMRC you need to register for Corporation Tax no later than 3 months after doing so.
We trust this information is of use to you.
Regards,
The Rapid Formations Team
Hi. Can you please advise?
I’ve registered a limited company for doing online business. Simply, selling products online.
I haven’t start trading yet. It will take couple of month for me to set up everything.
I’ll be spending money for some services like branding, buying barcodes for my product, photo shoots, suppliers, manufacture and etc before trading.
That means I’m already using my bank account for my business expenses. So, the question is really simple: when do I need to activate for corporation tax?
I’m confused because I haven’t started selling anything yet, but I’m spending money and I’d like it to be include in my business expenses.
Thank you for your kind enquiry, Knara.
The word ‘trading’ for the purposes of Corporation Tax constitutes the ‘buying and selling’ of things with the aim of making a profit. Therefore, if you are already purchasing goods/services with the intention to use these to sell products or services to make a profit in future, you would be classified by HMRC for the purposes of needing to declare a tax return for Corporation Tax as ‘trading’. This means that you should register with HMRC as a trading company for the purposes of Corporation Tax as soon as possible, as you are already carrying out this activity.
You will also be able to claim back any allowable business expenses for goods/services you have purchased already.
I trust this information is of use to you. If you require any further information, please do not hesitate to leave a follow up comment.
Regards,
The Rapid Formations Team
Hello,
So we have three corporations registered and have only made some small purchases with them. Will we still need to file tax returns? We haven’t traded goods or services or anything.
Kind Regards
Thank you for your kind enquiry, Daisy.
In general terms, limited companies in the UK must file annual accounts if there have been any ‘significant financial transactions’ over the accounting period. The only transactions which do not count as ‘significant financial transactions’ are things directly related to the company administration of the company – for example, the fee paid to form the company, file the company’s confirmation statement etc. If the financial transactions you speak of were not relating to company administration but were other types of purchases, this will need to be declared with a full set of company accounts. However, we would recommend you would not need an accountant to prepare such a set of accounts, as they should be relatively simple to compile using bookkeeping software.
I trust this information is of use to you.
Regards,
The Rapid Formations Team
Hi,
Me and my partner set up a Limited company in January 2020. Due to the COVID19 pandemic & the governments decision to close down the sector & industry we were intending to work in, we haven’t traded.
However, we have personally lent the company around 20k – and the company has bought assets & services etc. But the business hasn’t had a single £ of income revenue, and our tax return is due. What is the best course of action, do we file a normal account with an accountant or file a dormant account. Thanks in advance.
Thank you for your kind enquiry, Alec.
Dormant Company Accounts can only be filed if a company has not carried out any ‘significant’ financial transactions, with significant denoting anything which isn’t involved in the filing requirements of the company – e.g. the cost of incorporation, filing a confirmation statement etc.
Buying assets and services would constitute significant transactions, and therefore you will need to file normal annual accounts.
I trust this information is of use to you.
Regards,
Rachel
Hi there.
I set up a limited company on 21st Jan and website states UTR will be posted in 14 days…roughly 4th-5th February. I have to change company address details. Will HMRC post it to the new address I provide or I’ll loose the letter to the old address.
Thank you
Thank you for your kind enquiry, Elizabeth.
HMRC generally send post out via second class post, which can take up to five working days to arrive. The time period cited includes this postage delivery time. It is therefore likely that the posting of your UTR number is either imminent, or has already taken place.
I would suggest you change your company address details as soon as possible with Companies House, as this is where HMRC take your registered office address from.
I trust this information is of use to you.
Regards,
Elizabeth
Hi,
I registered a Limited Company a couple of years ago but never traded and the company is still dormant.
I received an email a couple of weeks ago from someone who’s asked if I’ll sell them my company as they are operating under the same name as a sole trader.
I’m not sure if I wish to give/sell them my company as it was a name that I worked hard to come up with but I’m not sure whether it’s worth keeping if they are already trading with that name.
Can this person operate as a sole trader with the same name as my Limited Company name and if so can I actually sell my Limited Company to them?
Many thanks
Thank you for your enquiry, Phil.
In general terms, if a sole trader is operating under the same name as your limited company name, this can be a legal breach only if they are operating in the same industry as your limited company and could be deemed by a reasonable person to be ‘passing off’ as yourself – i.e. misleading people into believing they are your company. If they operate in a different industry, they are able to use your company name as long as they don’t put limited or ltd at the end. This is why you will see ‘McDonald’s’ bakers around the country, even though there is a very famous ‘McDonald’s’ company already in existence – for example.
With regards to selling your limited company to them – you can of course do this, by selling all shares within the limited company to them, and carrying out a Transfer of Shares. If you require further assistance with transferring shares to another person, we offer a Transfer of Shares product, which can be found here: https://www.rapidformations.co.uk/transfer-of-shares/
I trust this information is of use to you.
Kind regards,
Rachel
Hi
Thanks for this information. Just to double check. I intend to register a new ltd company with companies house but don’t intend to trade for some time, several months. Do I need to do anything else or do I just wait to contact HMRC when I start trading? Basically do I need to tell them I’m not trading?
Cheers
Thank you for your kind enquiry, Paul.
You must inform HMRC that your company is dormant, otherwise you could be liable for a financial penalty. You can either call HMRC on 0300 200 3410 or send them a letter by post to:
Corporation Tax Services
HM Revenue and Customs
BX9 1AX
United Kingdom
to inform them that your company is dormant. You should ensure you have your company UTR number to hand when calling them.
I trust this information is of use to you.
Regards,
Rachel
Hi there, I created a limited company at the start of the year but with Covid -19 we put it all on hold with the situation, We haven’t traded At all since it all started.
What do we do about company tax return or any for of tax return with out any trades?
Kind regards,
Tom
Thank you for your kind enquiry, Tom.
If you have already informed HMRC that you are trading, we recommend you call them on 0300 200 3300, to inform them that your company has not started trading due to Covid-19.
Once you have informed them of this, you should ask them if they will allow you to file Dormant Company Accounts – which are a set of abbreviated accounts which exist for companies which have not traded. If they say yes, you can file these yourself, or allow us to file your Dormant Company Accounts for you by ordering here: https://www.rapidformations.co.uk/dormant-company-accounts/
I trust this information is of use to you. If you have any other queries, please do not hesitate to leave a comment.
Regards,
Rachel
Hi I have just set up a limited company as this company won’t be trading for the time being
Do I need to register for PAYE
Thank you for your enquiry, Shane.
Your company will need to register with HMRC for PAYE as soon as it intends to pay even the directors (e.g. yourself) or any other employees a salary. There is no obligation to register for PAYE before this time, so if your company is not trading and not paying any salaries (including to yourself as a director), you can wait until such time as this is necessary.
I trust this information is of use to you.
Kind regards,
Rachel
Thanks for your question, Ben.
There is no time limit for turning a sole trader/partnership business into a limited company. You can do this at any time. The only thing you need to ensure is that a transfer of assets takes place from the sole trader/partnership to the limited company. If your company has been trading for over 3 months, you should inform HMRC as soon as possible in relation to Corporation Tax.
I trust this information is of use to you.
Regards,
Rachel
I’ve formed a small company being the only director/share holder. I’m the only employee also, can I draw money out my profits as dividend instead of paying myself a wage?
Hi Valerie
We do not give accountancy advice however as a shareholder then if there are profits available then you may draw dividends from the company.
Best Regards,
Rapid Formations Team
Hello. I set up a ltd company almost a year ago. From me setting it up to actually receiving confirmation the contract fell through and no longer required a ltd company. Completely forgetting this had been set up I’m now receiving tax return letters for a company I’ve never used and never even set up a business account for. Now I’m worried about penalties. I had no idea I had to register the company dormant because I didn’t get that far as a ltd company to be active. Thank you
Dear Luke
The first decision for you is if you would like to continue with the company. If you would prefer to strike the company off the public record then you will be able to do this by submitting the correct information to Companies House. We offer a dissolution service which explains what is required so please see link https://www.rapidformations.co.uk/company-dissolution/ If you decide to dissolve your company you should bring the company matters up to date prior to starting the dissolution process so if accounts or a Confirmation Statement is due these should be filed before dissolution.
Best regards,
Hi,
I formed a ltd partnership company with my brother before covid for the purpose of entrepreneur visa. I am now wanting to start a business with my husband with another company name but would like to connect the 2 companies to satisfy my visa needs but at the same time not have any financial link between the profits and losses of both companies. How do I show this connection on hmrc?
Hi Sanz
Thank you for your kind enquiry.
Unfortunately, on the matter of connecting the two entities, I am afraid the information provided does not allow us to provide a specific response. I would suggest you email us at cosec@rapidformations.co.uk providing more detail to allow us to provide a meaningful reply.
On the point with regards HMRC/profits and losses – we are unable to comment on specific financial and tax matters and would advise you seek the advice of an accountant.
Kind regards.
The Rapid Formations Team
Hi,
I registered my company on the 2nd of June, this Friday it will be 2 weeks.
I haven’t done any trade with any customers yet.
In the 2nd or 3rd week of July when my supplier comes back from holiday I will be ordering my stock and then I will sell that to customers.
Do I need to register for Corporation tax now?
Thank You
Tazzy
DearTazzy,
Thank you for your message.
We are not accountants but given that you are going to trade within the first 3 months of existence of your company, you should register with HMRC now.
Best regards,
Rapid Formations Team.
Hi,
I’m looking at potentially setting up my own production company, I asked my tutor at college who has her own production company whether I need to register it with companies house, she told me I don’t have to but I wasn’t too sure how to set it up without registering to companies house as me and a friend will run the company but won’t be making any money for a very long time.
If you can help me clarify this, it would be greatly appreciated.
Tom
Dear Thomas,
What your tutor was saying is that you can have a trading business which is not a limited company, you could start a partnership instead without involving Companies House. Any income from the partnership would be treated as a self-employed income and you would file information and pay tax to HMRC at the appropriate times.
Best regards,
Rapid Formations Team
Hi Rachel,
I was a director of limited company. It was just two of us, me and my friend. I resigned as a director and left company. She stayed as a director. We informed Company House about resignation. So now I am going to be stay at home mum. Do I have to inform HMRC that I am not working anymore? If yes how I can do this? If HMRC gave me status as employed by the company and not self-employed how do I have to inform HMRC that I resigned and not working anymore? Thank you.
Dear Nozima,
Thank you for your message.
Unfortunately we are not professional advisors and cannot explain how to inform HMRC of changes in your circumstances. If you had been required by HMRC to file a Personal Tax Return then in the last return you file you should denote when you stopped working for the limited company so your Personal Tax Return would show that you are no longer working.
Best regards,
Rapid Formations Team
Hi Rachel,
I have also recently registered a company with the Companies House and have incurred startup costs for that business pre-registration in FY16. We will however, only begin to trade in new financial year.
Is it possible to therefore be dormant for FY16 and transfer the FY16 costs to the FY17 accounts?
Thanks,
Sam
Dear Sam,
Unfortunately we are not accountants so cannot advise on the treatment of expenses. I would suggest you contact an accountant about this.
Best regards
Hi, I currently trade as a sole trader but want to change to a limited company but want to do this at the beginning of the new tax year. Can I register with companies house now and then inform HMRC the company is dormant, and make the change to the business at the new tax year? I’m wanting to register the company so that I can be sure my company name is safe which is the only reason I’m thinking of doing it now before the new tax year. Thanks
Dear Sarah,
Yes, you can register your company just now and it can remain inactive until the tax year. HMRC will send out a letter regarding Corporation Tax for your company around 2-3 weeks after it is formed. You can follow the instructions there to inform HRMC when your limited company will begin trading.
Kind Regards
Hi, i have just gone to being a private limited company from salt assessment tax, Do i need to re-register my business with HMRC? 🙂
Dear Martin,
Thank you for your message.
Your new limited company will be registered automatically with HMRC for Corporation Tax however you may need to register the business with HMRC for other taxes such as PAYE and Vat.
Best regards,
Rapid Formations Team
Hi Rachel,
I am planning to utulise your service to form my company. However, I dont want to start trading till April/May next year.
My questions are
1) After you help me to create the co. do I need to make the company dormant until May 2017?
2) Can I have a business bank account and use it to claim expenses such as travel to exhibitions that I will require to attend for the business?
Many Thanks
Ruslan
Hi Ruslan,
If you wish to open and use a business bank account for pre-trading purposes your new company cannot be dormant – every significant transaction that goes through your business bank account must be entered into your accounts. This would mean your company would be ‘active’ and you would be required to submit accounts and tax returns to HMRC.
A significant accounting transaction is any purchase or expenditure apart from:
– Payment for shares from the first shareholders (subscribers who join the company at the time of incorporation)
– Payments made to Companies House for the filing of confirmation statements or changing the company name
– Late filing penalties paid to Companies House
If you do wish to make your company dormant until you decide to start trading fully, you can pay for incidental expenses through your personal bank account, but you will not be able to claim these expenses back from the company when it becomes active.
I hope this clarifies matters but please don’t hesitate to get back in touch if you have any other queries.
Best wishes,
Rachel Craig