Limited companies are ‘active’ as soon as they are incorporated at Companies House because they are in existence and able to trade. However, the definition of an active company is broader at HMRC. For Corporation Tax purposes, a company is only considered ‘active’ when it starts carrying on some form of trading activity, such as buying and selling goods or services, managing investments, or receiving any other form of income.
These kinds of trading activities are viewed as ‘significant accounting transactions’ and they must be entered into the company’s accounting records. In such cases, the company must be registered with HMRC for Corporation Tax, file Company Tax Returns, and pay Corporation Tax at the end of each accounting period.
Active company requirements for HMRC
When you incorporate a new limited company, Companies House will inform HMRC of its existence. Within a couple weeks after company formation, you should receive documentation from HMRC that outlines your obligations and requirements regarding tax. You will also be provided with your Unique Taxpayer Reference (UTR).
If your company is active for Corporation Tax, you must register for Corporation Tax within 3 months of carrying on any taxable activity. You must then:
- pay Corporation Tax within 9 months and 1 day after the end of your company’s accounting period
- file a Company Tax Return within 12 months after the end of your company’s accounting period
These dates will be provided by HMRC shortly after you register your company as ‘active’ for Corporation Tax.
If your company is inactive, you must inform HMRC as soon as possible by contacting the Corporation Tax office to state the date on which your company became (or will become) dormant.
This applies to newly formed companies that have never traded, as well as previously active companies that become dormant after a period of trading.
If your company was previously active, you will need to file a Company Tax Return and pay Corporation Tax for the period of activity prior to becoming dormant.
Active companies may also have to register with HMRC for Value Added Tax (VAT) and Pay As You Earn (PAYE).
Active company requirements for Companies House
Companies House does not need to be informed straight away if your company is active for Corporation Tax. You will notify them retrospectively when you file your annual accounts, which must be delivered no later than 9 months (or 21 months for your first accounts) after your company’s accounting reference date (ARD).
The ARD date signifies the end of your company’s financial year, which normally falls on the anniversary of the last day of the month of incorporation.
Dormant companies should prepare dormant company accounts for Companies House. This is how you inform Companies House that your business has not yet started trading or has ceased trading.
Both dormant and active companies must submit an annual confirmation statement to Companies House to confirm and/or update key information about the internal structure of the business, including:
- company name
- registered office address
- SIC codes
- shares capital
- information about directors, shareholders, and people with significant control (PSCs)
The confirmation statement should be filed no later than 14 days after the anniversary of company formation or the anniversary of the previous confirmation statement. You must submit one every year, regardless of whether your company is active or dormant.
