Implications of Not Filing for Dormant Companies

It’s a relatively straightforward process to keep a dormant company going.

Your duties as a director of any company consist of making sure your annual return and company accounts are submitted on time each year. For a dormant company, the absence of ‘significant transactions’ generally means you have very little in the way of substantive information to report.  This doesn’t mean you can afford to ignore your obligations though, or that dormant company directors are immune to penalties.

Here, we look at the consequences for dormant companies of getting things wrong, incorrect filing, late filing and failing to file at all.

Getting it wrong: are the sanctions real?

“You can be fined up to £5,000 and your company struck off the register if you don’t send Companies House your annual accounts or return”.

This is the rather stark warning that’s given several times in the government’s guidance pages. So is this threat real? The statistics from Companies House tell their own story and between April 2014 and March 2015, an incredible 142,512 fines for late payment of company accounts were imposed, amounting to almost £68 million.

Bear in mind these two general points regarding penalties:

  • Try not to leave your paperwork until the last minute. This is a good rule of thumb in all cases but is especially relevant if you are submitting documents through the post rather than online. If there’s a basic error to be rectified (such as a missing signature or the wrong year in the date field) leaving it to the last minute means there’s not enough leeway to get the error rectified before the deadline date.
  • Unsurprisingly, the argument “The form’s lost in the post” is not viewed as a valid excuse by Companies House. It’s a good reason to opt for WebFiling where possible.

Company accounts

The absence of transactions means that the preparation of company accounts for a dormant company tends to be an extremely straightforward process. In most cases, the information you are providing hardly alters from one year to the next. Annual accounts need to be prepared and filed each year within 9 months of the end of a company’s financial year. Companies House sends out reminders and you can also sign up to an email reminder service.

Late filing of annual accounts is a criminal offence. The company itself can face a civil penalty and as a director non-compliance can mean personal prosecution and a fine of up to £5,000.

In the first instance, the automatic consequence of failure to submit your accounts on time is a fixed penalty. The longer you leave it the more you have to pay. Here’s the sliding scale of fines currently in force:

  • Up to one month late: £150
  • 1-3 months: £375
  • 3-6 months: £750
  • More than 6 months: £1,500

The penalty is doubled if you are late 2 years in a row.

The Confirmation Statement

The obligation to update the Confirmation Statement is a specific requirement and is separate from your company accounts duties, so avoid falling into the trap of assuming that once you’ve filed your company accounts your dormant company admin duties for the year are over.

For the Confirmation Statement, Companies House will send you an email alert or a letter to your registered office when the return is due. In the first year, the due date is usually the anniversary of the company’s incorporation. In subsequent years the due date is a year from the date the previous year’s Confirmation Statement was checked. The annual return must be received by Companies House within 28 days of the due date.

Can I appeal against a sanction?

In theory, yes – but in practice, there will be very few situations where the grounds for appeal will be met. Broadly, a valid reason for non-compliance is one that is out of your control and makes it impossible for you to meet the deadline. Remember that with a dormant company you are most likely to be providing the same information from one year to the next. As such the potential scenarios where you would be deemed incapable of doing this are likely to be few and far between.

Keeping your diary up to date

Giving yourself plenty of time is the best way to avoid a sanction. A simple error means the need to resubmit which, in the case of company accounts especially, means an automatic fine if this takes you beyond deadline day.

Bear in mind the key advantages of dormant company ownership for a sole trader are that it’s a cost-effective way of putting everything in place for when you’re ready to trade as a company, and it helps protect your business name.

Don’t reduce that cost-effectiveness by needlessly picking up a penalty.

Now that you’re clued up on what you need to do to keep your dormant company in check why not learn more about running a business for when you decide to start trading?

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