Change Company Status to Dormant: Step-by-Step UK Guide

Key Takeaways

1. You can change company status to dormant in the UK by following a precise, step-by-step process with both HMRC and Companies House.
2. A dormant company is one that has stopped all trading activities and receives no income except for specific permitted transactions (such as minimal bank interest).
3. Notifying HMRC that your company is dormant and filing dormant company accounts at Companies House are critical for compliance and to avoid fines or accidental trading.
4. Failing to carry out the dormant company process correctly can lead to penalties, Companies House strike-off, and unexpected Corporation Tax liabilities.
5. Cancelling VAT registration and PAYE schemes is necessary if your company becomes dormant—this is actioned through forms like VAT7 and written requests to HMRC.
6. UK company directors must meet annual requirements, such as submitting confirmation statements and micro-entity accounts, even while dormant.
7. Go-Legal AI provides lawyer-approved templates and practical tools, including sample HMRC notification letters and a VAT7 guide, to help you avoid common compliance mistakes.
8. You can change company status back from dormant to active, but you must inform HMRC and resume trading within the appropriate legal steps.
9. Go-Legal AI is rated Excellent on Trustpilot with over 170 five-star reviews from satisfied users.

How to Change Company Status to Dormant in the UK: Complete Legal Guide

Are you unsure how to change your company status to dormant without falling foul of HMRC or risking late filing penalties? Many founders, directors, and small businesses in the UK find the process overwhelming—missing a mandatory filing or an official notification can quickly lead to costly fines or even potential strike-off from the Companies House register.

Careful, timely action is essential. To make a company dormant, you must wholly cease trading, effectively communicate with HMRC, submit dormant company accounts, and cancel any relevant VAT or PAYE registrations. This ensures your business avoids accidental trading and remains compliant, protecting you against tax bills, regulatory notices, and possible administrative closure.

This expert-led guide from Go-Legal AI explains, step by step, how to change company status to dormant. You’ll find practical compliance tips, actionable checklists, downloadable tools, and example documents that help you complete the process efficiently and correctly.

What Does It Mean to Change Company Status to Dormant in the UK?

A dormant company in the UK is one that has stopped all, or virtually all, trading activity. However, dormancy is defined differently by HMRC and Companies House:

• HMRC Dormant: For HMRC, a company is dormant if it has ceased all trade (no sales, purchases, contracts, payroll, or advertising) and has no outstanding Corporation Tax liabilities in the relevant period. Turning dormant for tax reasons means formally informing HMRC that you are not trading.
• Companies House Dormant: At Companies House, your company is dormant if there have been no “significant accounting transactions” throughout the financial year. The only permitted exceptions are payments for shares on incorporation or statutory filings (like the annual Companies House fee).

Cease Trading: This means your company has stopped all business operations—no sales, no purchases, and no new business contracts.

Confirmation Statement: Previously called the Annual Return, this is an essential annual filing at Companies House, confirming your company’s registered details—even if you are now dormant.

Annual Return Date (ARD): The statutory deadline for submitting your confirmation statement each year.

Why Change a Company to Dormant? Key Benefits and Common Risks

Changing company status to dormant can be a strategic decision for UK businesses, particularly start-ups and SMEs:

• Pausing Operations: Dormancy lets you temporarily stop trading until you are ready to relaunch, without closing the company.
• Name and Brand Protection: Dormant status keeps your company’s legal registration and protects your business name.
• Streamlined Compliance: True dormancy means streamlined reporting—no need to submit full Corporation Tax returns or quarterly VAT filings.
• Cost Savings: By halting trading, you may reduce accountancy and compliance costs, as dormant filings are usually simpler.

However, there are critical risks to be aware of:

• Missed Compliance: Even dormant companies must file annual confirmation statements and dormant accounts. Failure results in fines and potential removal from the register.
• Accidental Trading: Minor activity, such as bank interest paid to your account or automatic payments, can break dormancy and reset your reporting obligations.
• Automatic Penalties: Late or inaccurate filings typically trigger fines and, in repeated cases, strike-off procedures.

Step-by-Step: How to Change Company Status to Dormant

To successfully change company status to dormant in England & Wales, follow these precise steps:

1. Stop All Business and Financial Activity: Halt all revenue-generating work, purchases, contracts, and payroll. Officially record your cease trading date.
2. Notify HMRC in Writing: Immediately send an official notification to HMRC with your company name, Unique Taxpayer Reference, business address, director details, and cease trading date.
3. Submit Final Corporation Tax Return (if requested): HMRC may ask for a final return, covering the period until you ceased operations.
4. Cancel VAT Registration: If registered, deregister for VAT within 30 days using form VAT7 or the Government Gateway. File your final VAT return promptly.
5. Close Payroll/PAYE Scheme: If operating payroll, write to HMRC confirming cessation and requesting closure of your payroll scheme.
6. Prepare Board Minutes: Document the directors’ formal decision to make the company dormant—this is required for robust governance and audit trails.
7. Notify Your Business Bank: Tell your bank the company is now dormant and only permitted transactions (like annual Companies House fees) will be made.
8. File Dormant Company Accounts and Confirmation Statement: Lodge both documents annually with Companies House using the correct dormant templates or online services.

Most businesses can complete this process within 2–4 weeks, subject to the speed of closing up tax accounts and submitting forms.

How Do I Notify HMRC That My Company Is Dormant?

HMRC requires prompt, formal notification when your company becomes dormant. Failing to submit correct information can result in ongoing Corporation Tax demands and penalties.

Your dormant company notification must include:

• Company name and number
• Unique Taxpayer Reference (UTR)
• Registered office address
• Director’s name and signature
• Date you ceased trading
• Clear statement confirming no further trading or income

Submission: Post your letter to your local corporation tax office (shown on HMRC correspondence), or use HMRC’s online portal.

Timing: Notify HMRC promptly after trading ceases. If HMRC requests a tax return, you must still file it up to the cessation date.

Cancelling VAT and PAYE: Ensuring Full Compliance

When your company becomes dormant, it is crucial to formally close down any VAT and payroll (PAYE) schemes:

• VAT: Notify HMRC within 30 days of stopping trading by submitting form VAT7 or completing the relevant steps via your Government Gateway account. Submit a final VAT return for the period up to cessation.
• PAYE: If you previously paid any staff or directors, write to HMRC requesting closure of your payroll scheme.

Deadlines & Risks:

• Failing to deregister VAT on time leads to continued filing requirements and potential fines.
• Open PAYE schemes mean ongoing payroll reporting obligations, even with no employees.

Accidental Trading: What to Avoid When Dormant

“Accidental trading” is the number one obstacle to maintaining dormant status. It often happens when companies unknowingly process payments or expenses outside of what is legally permitted.

Common triggers include:

• Receiving even small sums of bank interest or a late-paying client
• Paying for digital subscriptions, insurance, or web hosting
• Reimbursing director expenses or paying any salary/PAYE
• Recording asset depreciation in your company accounts

Permitted transactions are limited to:

• Payment for shares on incorporation
• Companies House statutory filing fees

Filing Dormant Company Accounts: Step-by-Step with Companies House

Dormant companies must meet specific Companies House reporting obligations each year.

Eligibility: You can file as dormant only if no significant accounting transactions occur in the year (aside from fees or share payments).

Filing Process:

1. Log in to Companies House WebFiling or use the online service.
2. Select ‘Dormant Company Accounts’ for your submission type.
3. Ensure your balance sheet contains only minimal, allowed transactions.
4. Synchronise your accounts filing with the Annual Return Date (ARD).
5. File the annual confirmation statement separately.

Key fields to verify: Avoid listing any revenue, expenses, or asset depreciation. For micro-entities (very small companies), note that “micro-entity accounts” are only used when trading—dormant filings are different and usually simpler.

Common pitfalls: Late filings (more than nine months after period-end), mismatched accounts periods, or reporting non-permitted transactions.

Dormant Company Compliance Checklist

What If Dormant Company Steps Are Missed or Delayed?

Missing a filing or delaying a notification after ceasing trading can result in:

• Automatic Penalties: Dormant accounts submitted late incur a £150 minimum penalty, increasing if overdue by more than three months.
• Strike-Off: Non-filing triggers Companies House to strike your company off the register. This ends your legal existence and may result in assets passing to the state (Bona Vacantia).
• Continuing Tax and HMRC Demands: Without formal dormancy notification, HMRC treats your company as active and will expect ongoing tax compliance.
• VAT/PAYE Fines: Non-deregistered schemes result in automatic penalty notices for missed returns or payroll filings.
• Public Reputation Damage: Non-compliance appears on the public Companies House record, affecting credit rating and business credibility.

Reactivating Your Dormant Company

To change back to active status and restart trading:

1. Begin Trading: Resume any business activity (sales, purchases, signing contracts), which automatically ends dormancy.
2. Notify HMRC: Inform HMRC within three months of recommencing trade, so they update your tax status and reactivate Corporation Tax obligations.
3. File Full Company Accounts when Due: Following the current Companies House cycle, prepare and submit full, non-dormant accounts.
4. Register for VAT/PAYE If Needed: Exceeding the threshold or employing staff means you must re-register accordingly.

Always keep a clear, auditable record of all steps and communications related to status changes.

Go-Legal AI: Expert Tools for Dormant Company Status

Go-Legal AI streamlines the dormant company process, providing you with effortless compliance and reliable tools:

• Automated Letter Generators: Instantly create accurate HMRC notification letters, board resolutions, and VAT7 deregistration forms.
• Comprehensive Template Library: Access a bank of lawyer-reviewed tools, including board minutes, compliance checklists, and dormant filings.
• Intelligent Compliance Calendar: Receive automated reminders for all key filings, ensuring no important date is missed.
• Instant AI-Powered Support: Ask questions anytime and get trustworthy answers in plain English.

Frequently Asked Questions

How do I choose the correct cease trading date?

The cease trading date should be the last day your company carried out any business activity or received income. If you phased down operations, use the date the final invoice was paid or the last service was delivered. Accurate recording of this date supports timely HMRC notification and tax filings.

Do I need to close my business bank account?

No. You can keep your company bank account open while dormant but only use it for statutory permitted payments (such as the Companies House fee). Any other transactions may break dormancy.

What transactions are allowed for a dormant company?

Transactions are strictly limited to statutory payments, like filing fees or share issues at incorporation. Paying suppliers, staff, or taking on contracts is not allowed if you wish to remain dormant.

How long can my company stay dormant?

There’s no maximum period—a company may stay dormant for years, provided it files dormant accounts and confirmation statements on time every year.

Do I have to pay Corporation Tax while dormant?

No—once HMRC confirms you are dormant, there is no Corporation Tax due for periods where no trading occurs. Any earlier tax obligations must still be paid.

Is there a fee to file dormant accounts?

Companies House allows you to file dormant accounts online for free. Paper filings may incur a small charge.

Can a dormant company employ staff or pay salaries?

No, running payroll or paying staff (including directors) is not allowed. Doing so would end your dormant status and trigger active company obligations.

What is the difference between dormant and closed companies?

A dormant company is still legally registered but not currently trading. A closed company is one that has been formally dissolved and struck off the Companies House register.

Will my dormant company appear in public records?

Yes. Your company remains listed at Companies House (publicly accessible) until formally dissolved—even if dormant.

Can I easily reactivate my dormant company?

Yes. As soon as you restart trading, update HMRC within three months, file full company accounts, and (if necessary) re-register for VAT or PAYE.

Change Your Company Status to Dormant with Confidence

Changing your company status to dormant the right way is vital for maintaining good standing, avoiding fines, and protecting your long-term business interests. One missed filing or notification can result in penalties, a damaged reputation, or even the loss of your company registration. Relying on outdated instructions or incomplete templates leaves you exposed to unnecessary risk.

Go-Legal AI provides a seamless solution—offering automated forms, compliant guidance, and always-on support, so every dormancy step is managed accurately and on time. Free yourself from legal headaches and administrative guesswork. Focus on your business, knowing your dormant company is protected, compliant, and ready for the future.

Ready to ensure compliance with confidence? Start your free trial to generate all required paperwork, notify HMRC, and handle filings in minutes.