A dormant company is a limited company that is not doing business and has no other income. That’s the dormant company meaning in plain terms, but the status matters in two separate systems that use the word differently: Companies House calls a company dormant when it has had no significant accounting transactions in the financial year, while HMRC calls it dormant when it is not active for Corporation Tax. A company can be dormant for one and not the other. For property investors this distinction is important. An SPV that lets a property earns rental income, so it cannot be dormant for Corporation Tax even if nothing else happens all year.
This article explains what dormancy means in each system, when a property SPV genuinely qualifies, how to make a Limited company dormant, and what you still have to file.
Key Takeaways
- A dormant company is a limited company with no significant accounting transactions and no trading or other income during the financial year
- Dormant for Companies House and dormant for Corporation Tax are two separate tests; you can meet one without meeting the other
- A property SPV that receives rent is active for Corporation Tax; only an SPV that holds an asset and earns nothing can be dormant on both tests
- Filing fees, late-filing penalties, and shares issued on incorporation are not significant transactions, so paying them does not break dormancy
- Every dormant company must still file annual accounts and a confirmation statement, or face automatic penalties and possible strike-off
- A small dormant company can file simplified dormant accounts (form AA02) with no auditor’s report
When Does a Company Count as Dormant?
A company is dormant when it is not trading and has no other income. HMRC treats trading broadly. Trading includes buying, selling, renting property, advertising, employing someone or getting interest. If any of those things happen, the company is active, not dormant.
The word carries two meanings, and getting them confused is the most common error directors make. Companies House judges dormancy by looking at transactions on the company’s books. HMRC judges it by looking at whether the company is within the charge to Corporation Tax. The tests overlap but are not identical, and the same company can be dormant under one and active under the other in the same year.
For a property company, the trigger is almost always income. A company formed to hold an asset can sit dormant indefinitely, but the moment it collects rent, charges a fee, or earns bank interest, it stops being dormant for Corporation Tax purposes.
What Counts as a “Significant Accounting Transaction”?
Companies House dormancy turns entirely on this phrase. A company is dormant for Companies House if it has had no significant accounting transactions in the financial year. This means no entries that the company would have to record in its accounts, other than a short list of exceptions.
The exceptions are narrow but useful. Significant transactions do not include filing fees paid to Companies House, penalties for late filing of accounts, or money paid for shares when the company was incorporated. Everything else, like paying an accountant, receiving rent, settling an invoice, paying bank charges, is a significant transaction and ends dormancy for that year.
This is where property SPVs slip up. A single bank charge on the company account, or a management fee paid to a letting agent, is a significant accounting transaction. If it hits the books, the company is no longer dormant for Companies House for that financial year.
Dormant Property SPVs: When Does It Make Sense?
A Special Purpose Vehicle (SPV) is a limited company set up to hold property, usually Buy-to-Let. Whether it can be dormant depends on one question – Is it earning anything?
HMRC’s own guidance lists, as an example of a dormant company, a company that will never be trading because it has been formed to own an asset such as land or intellectual property. So, an SPV that holds a property but generates no income (for example, a company incorporated ahead of a purchase that has not completed, or one holding land awaiting planning) can legitimately be dormant.
The line is income, not activity. An SPV holding a vacant plot with no rent, no interest and no costs running through its account can be dormant on both tests. An SPV that lets the property cannot. Rent is income, and income makes the company active for Corporation Tax. Directors who assume the company barely does anything, so it must be dormant are usually wrong.
Common situations where dormancy genuinely fits a property structure are:
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An SPV incorporated to secure a company name or mortgage-in-principle, before any purchase completes
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A holding company at the top of a group that holds shares but has no income of its own (though intra-group activity needs checking)
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A former letting SPV where the property has been sold, all income has stopped, and the company is being kept rather than closed
If you are unsure whether your SPV structure qualifies as dormant, particularly across a group, or where a property has just been sold, this is worth a short professional review before you tell HMRC anything.
Our SPV compliance service reviews your company’s status and files the correct accounts and confirmation statement.
Dormant Company Meaning on Companies House
For Companies House, a company is dormant if it has had no significant accounting transactions during the financial year. The test is purely transactional. It does not ask whether you intend to trade, only whether the books moved.
The practical benefit is a lighter filing. A company that is dormant according to Companies House and also qualifies as small can file dormant accounts instead of full accounts, and does not have to include an auditor’s report. Dormant accounts are short, typically just a balance sheet with a few notes, which is why keeping a company genuinely dormant is cheap to maintain.
You do not have to notify Companies House when you stop or start being dormant. The next set of non-dormant accounts you file will show that the company is no longer dormant. The status is inferred from what you file, not declared in advance.
Dormant for Companies House vs Dormant for Corporation Tax
These are the two systems, and the difference is the single most important thing in this article.
| Dormant for Companies House | Dormant for Corporation Tax | |
|---|---|---|
| Who Decides | Companies House | HMRC |
| The Test | No significant accounting transactions in the year | Not active, trading or receiving income |
| A Let Property SPV | Can be dormant only if no transactions hit the books | Cannot be dormant, rent is income |
| What You File | Dormant accounts (if also “small”) | Nothing once HMRC confirms dormancy, unless a notice is issued |
| Confirmation Statement | Still required | N/A |
HMRC views a dormant company as one that is not active, not liable for Corporation Tax, or not within the charge to Corporation Tax. This is a definition that, HMRC states, is not necessarily the same as the one used by Companies House.
What Are Dormant Company Accounts?
Dormant company accounts are a simplified set of statutory accounts that a small dormant company files with Companies House, using form AA02. They generally consist of a balance sheet and supporting notes, with no profit and loss account and no auditor’s report. Because a dormant company has no significant transactions, the balance sheet usually shows little more than the called-up share capital.
They still count as annual accounts. Filing dormant accounts does not exempt you from the deadline, and a dormant company that files them late is penalised exactly like an active one.
Why Would You Have a Dormant Company?
Directors keep companies dormant for practical, legitimate reasons like those listed below:
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Protecting a Name
Registering an SPV name early stops a competitor taking it before your purchase completes
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Holding an Asset With No Income
A company formed to own land or IP with no revenue can sit dormant.
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Pausing a Business
A trading company can be made dormant during a break rather than closed and re-formed.
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Preparing an SPV
Investors often incorporate ahead of a purchase; the company is dormant until completion and first rent.
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Group Structures
A holding company with no income of its own may be dormant.
How to Make Limited Company Dormant
Making a Limited company dormant is a matter of stopping activity and telling HMRC. There is no single “make dormant” button, and the steps differ slightly depending on whether the company has ever traded.
How to Change Your Limited Company Status to Dormant
There is no separate form to change your Companies House status. Dormancy is shown by what you file, not by a declaration. Once the company has no significant transactions for a financial year, you simply file dormant accounts for that period and the register reflects it. The active step that requires positive action is telling HMRC, the Companies House side follows automatically from your next set of accounts.
Filing & Compliance for a Dormant Company
Dormancy reduces your filing burden. It does not remove it. This is the point most directors underestimate.
Do Dormant Companies File Accounts?
Yes. Even a dormant company must file annual accounts with Companies House. You must file your confirmation statement and annual accounts with Companies House even if your limited company is dormant for Corporation Tax or dormant according to Companies House. The only concession is that a small dormant company files the shorter dormant accounts rather than full statutory accounts.
Accounts are due nine months after the company’s financial year-end. First accounts have a longer window — up to 21 months from incorporation.
Confirmation Statement Obligations
The confirmation statement (which replaced the annual return) must be filed at least once every 12 months, dormant or not. It confirms the company’s registered details, i.e., directors, registered office, shareholders and people with significant control. There is no automatic financial penalty for filing it late, but failing to file it is a criminal offence and the registrar can strike the company off the register.
The confirmation statement can still be filed through the Companies House website, and the annual fee is £50 online or £110 by post.
What Happens If You File Late
Companies House imposes automatic penalties for late accounts. For a private company, the current schedule is:
Penalties double automatically if accounts are filed late in two consecutive financial years. Being dormant is no defence. A dormant SPV that misses its accounts deadline pays the same £150 to £1,500 as a trading company. Because a dormant SPV usually holds a valuable property, the risk of strike-off for persistent non-filing, which can result in the property passing to the Crown as bona vacantia, is far more serious than the fine itself.
Disadvantages of a Dormant Company
Dormancy is cheap but not free, and it is not always the right call:
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Ongoing Obligations
You still file accounts and a confirmation statement every year, indefinitely, or face penalties.
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Administrative Drag
A forgotten dormant company is a common source of automatic fines, precisely because directors stop thinking about it.
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No Trading, By Definition
The moment the company does anything commercial, including collecting rent, dormancy ends and full obligations resume.
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Easy to Break Accidentally
A single stray bank transaction ends Companies House dormancy for the year.
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Cost vs Closure
If you never intend to use the company again, keeping it dormant may cost more over time than formally closing it. A voluntary strike-off costs £13 online.
Dormant Company vs Non-Trading vs Struck Off
These three terms are often used loosely but mean different things.
| Status | What it means | Filing obligations |
| Dormant | On the register, no significant transactions / not active for Corporation Tax | Annual accounts + confirmation statement still required |
| Non-trading | Not currently trading but may have transactions or income (e.g. bank interest) | Full obligations; usually still active for Corporation Tax if it has income |
| Struck off | Removed from the register; the company legally ceases to exist | None — but any assets, including property, pass to the Crown as bona vacantia |
A non-trading company is not automatically dormant. If it earns bank interest or has transactions on its books, it is active for Corporation Tax and not dormant for Companies House. Strike-off is the end of the company entirely. This is very different from dormancy, and dangerous for an SPV that still holds property.
Conclusion
If you hold a property SPV, the dormancy question usually comes down to one fact – whether the company earns anything. An SPV waiting to complete on a purchase can be genuinely dormant; a let SPV collecting rent cannot, however quiet it feels. Getting this wrong cuts both ways. Treat an active company as dormant and you risk HMRC penalties for an unfiled Company Tax Return; forget a dormant company’s accounts and you risk an automatic £1,500 fine and, worse, strike-off of the company that holds your property. This is not a status to guess at, especially across a group or after a sale. If you want your SPV’s
Contact Property SPV
We review whether your property company qualifies as dormant, notify HMRC where appropriate, and file your dormant accounts and confirmation statement.
Frequently Asked Questions
A dormant company is a limited company that is not trading and has no other income during its financial year. The term is used by both Companies House (no significant accounting transactions) and HMRC (not active for Corporation Tax), and the two tests are slightly different.
Common reasons include protecting a company name, holding an asset such as land that produces no income, pausing a business during a break rather than closing it, or holding an SPV ready for a future property purchase. Dormancy keeps the company alive with minimal filing.
Indefinitely. There is no legal time limit on how long a company can stay dormant, provided it continues to file annual accounts and a confirmation statement each year. Many SPVs and holding companies remain dormant for years without issue.
Once you tell HMRC, you stop paying Corporation Tax and filing Company Tax Returns unless HMRC issues a further notice. You must still file annual accounts and a confirmation statement with Companies House every year. If you were VAT-registered or ran PAYE, you must deregister or close those schemes.
You still carry annual filing obligations, and missing them triggers automatic penalties despite the company earning nothing. Dormancy is easy to break accidentally — a single bank transaction ends it — and if you never plan to use the company again, closing it may be cheaper than maintaining it.
Yes. You reactivate it by telling HMRC the company is now active, which you must do within three months of it starting to trade or earn income. From that point, normal Corporation Tax, accounts and (if relevant) VAT and PAYE obligations resume.
The company’s directors. They remain personally responsible for ensuring accounts and confirmation statements are filed on time, even though the company is dormant. Penalties are charged to the company, but the underlying legal duty sits with the directors.
Telling HMRC is free. The ongoing cost is the confirmation statement fee (£50 online from 1 February 2026, £110 by post) plus preparing dormant accounts, which is inexpensive because they are short. Many directors use an accountant to file both for a modest fixed fee, avoiding the far larger cost of a late-filing penalty.
