Making your UK limited company dormant — the compliance checklist founders miss

There is a phrase we hear at least once a week at Filing HQ: "I'll just make the company dormant for a bit." It is almost always said by a founder whose side hustle has cooled off, whose contract has ended, or whose new venture is on pause while day-job reality reasserts itself. The instinct is right — pausing a limited company is genuinely easier than winding it up. But "going dormant" is not a single button on a government website, and every month we help founders who assumed it was.

Here is the awkward truth: a dormant UK limited company is still a fully live legal entity. It still has a registered office. It still has directors. It still has a confirmation statement deadline. It still has an annual accounts deadline. The only thing that actually changes is whether any money moves through it — and that distinction is policed separately by HMRC and Companies House, who have slightly different definitions of "dormant" and will absolutely penalise you if you satisfy one but not the other.

This is the no-drama guide to doing it properly.

What "dormant" actually means — and why there are two definitions

"Dormant" is one of those UK compliance words that looks simple and then turns out to mean two completely different things depending on who is asking. You have to satisfy both or you are not really dormant — you are just a company that has stopped trading and is slowly building up a problem.

Dormant for HMRC (Corporation Tax). HMRC treats you as dormant when your company has no income or expenditure at all during a period. No invoices issued. No sales. No interest on the business bank account. No paying suppliers, not even your own accountant. The moment a single pound moves, the company is "active" again and HMRC expects a Corporation Tax return (CT600) covering that period.

Dormant for Companies House (accounts). Companies House uses the Companies Act definition: the company is dormant if it has had no "significant accounting transactions" during the financial year. Paying for your company formation, statutory filing fees, and certain unavoidable penalties are explicitly ignored. Almost nothing else is.

The practical result is that HMRC's bar is slightly higher than Companies House's — a stray £0.04 of bank interest will typically flip you out of HMRC-dormant status but probably not Companies House-dormant status. Founders who only understand one of the two definitions often trip the other one without realising.

Why founders go dormant in the first place

Closing a limited company properly takes time and costs money. Making it dormant preserves something useful: a named entity, a Companies House number, a bank account, a brand, and a trading history. We see four recurring reasons founders press pause rather than close:

• Contract pipeline has gone quiet. The consultancy work dried up for a quarter; you expect it back but don't want to bleed fees in the meantime.
• You pivoted to a new venture. The old Ltd still has a name and a history you may want to pick up later — or sell.
• You're protecting a brand or trademark. The company holds a domain, a social handle, or IP you don't want a competitor scraping up.
• You incorporated too early. Classic — you registered before you were quite ready to trade and now want to keep the name on ice until launch.

All four are legitimate. None of them remove your obligation to file on time. A dormant company that misses its deadlines looks exactly the same to Companies House as an abandoned one, and the strike-off process does not care about your intentions.

The dormant-company compliance checklist

Whatever the reason, the steps to a properly dormant UK limited company look the same. Work through them in order — skipping any one of these is how founders end up with frozen bank accounts, HMRC determinations, or strike-off notices.

1. Stop all trading activity — cleanly. Invoice out every outstanding job. Pay every outstanding supplier. Cancel subscriptions billed to the company. Check direct debits. The goal is a financial year in which nothing moves.
2. Close or ring-fence the business bank account. Bank interest — even pennies — can be enough to tip HMRC-dormant status. Many founders either close the account entirely, or move to a non-interest-bearing one. Confirm with your bank in writing that no fees, interest, or reward credits will be applied while the account is open.
3. Tell HMRC the company is dormant for Corporation Tax. This is the step most founders skip. You write to or call HMRC's Corporation Tax office (they also provide an online form) stating the date the company became dormant. Until you do, HMRC will keep sending CT600 reminders and can issue a determination estimating tax due and adding penalties to it.
4. Deregister for VAT if you were registered. A dormant company with no taxable supplies should not stay on the VAT register. File form VAT 7 to cancel.
5. Close your PAYE scheme if you're not paying anyone. Dormant companies rarely have staff. If your only employee was you and you've stopped salary payments, close the PAYE scheme with HMRC — otherwise the company will keep being flagged for missing RTI submissions.
6. Keep your registered office live and monitored. This is non-negotiable. Companies House will keep writing to you — reminders, verification notices, compliance letters. A dormant company with a proper registered office address is one that still receives and actions its post; a dormant company with an old flat or a cancelled accountant is a ticking strike-off clock.
7. File your annual confirmation statement — every year. Being dormant does not remove the confirmation statement requirement. The online fee is currently £50 and the 14-day filing window is as unforgiving as ever.
8. File dormant company accounts — every year. Form AA02 is the Companies House filing for a company that has been dormant since incorporation, and looks almost comically simple (a few figures). If your company has previously traded, you'll usually file abridged or micro-entity accounts showing no transactions.
9. Keep directors' and PSCs' identity verification up to date. Since 18 November 2025, identity verification is mandatory for directors and people with significant control under ECCTA — and dormant companies are not exempt. Any new director appointment or PSC change still triggers the usual identity verification requirements.

The five mistakes that quietly break dormant status

Founders rarely torpedo their own dormancy on purpose. It happens because the definitions are narrow and modern life is full of small automatic transactions. Watch for these:

• Bank interest, reward credits, or cashback. Even £0.12 of interest is a "significant accounting transaction" for HMRC. Either close the account or move to a zero-interest product and confirm in writing.
• Software subscriptions you forgot about. That accounting app, domain renewal, or G Suite seat the company pays for counts as expenditure. Cancel or move billing to a personal card (then record it cleanly in a director's loan account if it genuinely relates to the company).
• Paying an accountant from the business account. Ironic but true — paying a professional fee from the dormant company's account is itself a transaction that breaks HMRC dormancy. Settle professional fees personally or from another entity.
• Receiving a late payment from an old client. If a client finally pays an old invoice during the dormant period, the receipt itself is a transaction. Be ready to come out of dormancy for that period.
• Dividends or share issues. Issuing new shares, paying a dividend, or executing a share transfer that involves consideration all count as significant activity. Dormant companies should stay still, not restructure.

Dormant vs closed — when pausing is the wrong answer

Dormancy is not free. Between the confirmation statement fee, your registered office, and the hidden time cost of remembering to file dormant accounts on time, you are looking at a meaningful annual cost for a company that does nothing. Three honest questions help decide whether dormancy is the right call:

1. Do you have a concrete plan to trade through this entity again within 24 months? If the answer is "maybe one day", you are probably better off striking it off and forming a fresh company when you're actually ready.
2. Is the brand, domain, or Companies House number genuinely valuable? For some founders it is — especially where the company has trading history a bank or a client will want to see. For most side-hustle Ltds, it is not.
3. Are there outstanding creditors, HMRC debts, or director's loan balances? Dormancy does not erase these. If the company has liabilities, talk to an accountant before deciding whether to pause or close.

If the honest answer to the first question is "no", and the second is "not really", voluntary strike-off via form DS01 is usually cleaner — as long as the company has no debts, has not traded in the last three months, and has no ongoing legal proceedings.

Coming back from dormant — what to expect

Good news: resuming trade is easier than going dormant. The moment you invoice a client, open a new bank account, or take your first payment, the company is active again. You then need to:

• Tell HMRC the company is no longer dormant for Corporation Tax, and register for CT accounting within three months of starting to trade.
• Re-register for VAT if your turnover will exceed the threshold, or voluntarily below it.
• Restart PAYE if you're taking a salary again.
• File full company accounts for the next financial year rather than AA02 dormant accounts.
• Refresh SIC codes at your next confirmation statement if the nature of the business has changed — and file any director or PSC changes as they happen, not later.

The structural upside of having kept the company compliant while dormant is that you don't need to explain a gap to banks, landlords, or insurance underwriters. A clean dormant period looks like a clean dormant period. A messy one looks like risk.

The Filing HQ way

We built Filing HQ for exactly this kind of quiet-but-costly compliance work. A dormant company is a perfect example: the filings are simple on paper, but the penalty for forgetting one is wildly disproportionate to the effort saved. Our annual packages bundle registered office, confirmation statement tracking, dormant accounts support, and PSC/identity verification support — so a paused company stays paused, not accidentally struck off.