In the context of private limited companies, ‘active’ means a registered company that is carrying on trading activities or generating an income, as opposed to an inactive, non-trading company that is completely dormant. Companies House considers a company to be active when it has ‘significant accounting transactions’ during its accounting period. If a company is active, it is required to enter all transactions in its accounting records and submit full annual accounts and an Annual Return to Companies House every year. HMRC uses the term to describe companies that are buying and selling goods or services, managing investments or receiving any income of any kind, including interest. Any company that is involved in any of these activities is considered active for Corporation Tax purposes and required to register and pay for Corporation Tax, as well as VAT and PAYE if applicable.
Requirements for HMRC
When your new company is incorporated, Companies House will inform HMRC of its existence. Within a week or so after formation, you should receive documentation from HMRC outlining your obligations and requirements regarding tax. If your company is active, you must inform HMRC within 3 months of carrying out any taxable activity. You will then be liable to pay any Corporation Tax within 9 months and 1 day after your company’s accounting period ends and file an online Company Tax Return within 12 months after the end of your company’s accounting period. These dates will be provided to you by HMRC soon after registering as ‘active’ for Corporation Tax.
If your company is inactive or ‘dormant’ you will be required to inform HMRC as soon as possible by contacting your local Corporation Tax Office in writing and tell them the date your company became dormant – this applies to newly formed companies that have never traded and previously active companies that are becoming dormant. If your company was previously active you will be required to file a Company Tax Return for the period of activity prior to becoming dormant and pay any tax due.
Requirements for Companies House
Companies House does not need to be informed straight away if your company is active. They will be informed retrospectively when you file a full set of annual accounts within 9 months of the company’s Accounting Reference Date (ARD) – this date signifies the end of your company’s financial year and it will normally fall on the anniversary of the date of incorporation. You are also required to submit an Annual Return to Companies House each year detailing key information about your company, such as the company name and registered office address and details of all directors, shareholders and share capital. This should be filed on the anniversary of the date of company formation and it is required every year whether the company is active or dormant. Furthermore, you will only inform Companies House that your previously active company is now dormant when the time comes to file the annual accounts. At such time, you should file dormant accounts and you should continue to do so each year until your company become active again or it is dissolved.