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Is this company dormant for Companies House?

Is this company dormant for Companies House?

A limited company has not started trading yet (no selling-buying) and has no bank account but the director paid out of his pocket for set-up expenses (advertising, promotion mostly). For corporation tax the company is dormant and these expenses are classed as pre-trading and will be treated as incurred on first day of trading. But, is this company dormant for Companies House accounts? As I said there is no bank or cash activity by the company - some of the expenses though paid by the director the invoices are in the name of the company. Thanks. 

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11th Dec 2012 16:35

If you draw up a balance sheet today  then it would show accumulated losses and a liability to a director. Does that answer your question?

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By shogun
11th Dec 2012 17:12

hi 

hi 

Obviously there is no trade as yet, hence no such losses can be tax relieved. and what happens to the tax rule s.57 ITTOIA 2005 re pre-trading expenditure, which says these are treated as incurred on the first day of trading? Unless these expenses adjust the tax comp in the first accounting period the trade starts, . What a mess, wouldn't it better to file dormant accounts this year and deal with these expenses by adjustments when the company starts trading?

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By DMGbus
11th Dec 2012 21:05

Options

OPTION ONE

The director chooses NOT to claim the costs incurred until such time as the company starts trading.

Result = company is dormant.   File dormant accounts.

OPTION TWO

Prepare the full statutory boring (how many pages?) set of accounts because some think that the costs incurred but not reclaimed must be reflected in the accounts.

 

OPTION THREE

Prepare management accounts then abbreviated accounts to reflect the accrued costs.

File the abbreviated accounts online using Companies House online .pdf template. 

 

A merit of option one is that the CT computations in the first year of trading will be simpler, however it is denatable if the accounts would be accurate as they omit costs incurred for a future trade.

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By JAADAMS
20th Dec 2012 17:26

Check out my article on this very subject....

Dormant companies: Get the details right 08.11.11

 http://www.accountingweb.co.uk/article/dormant-companies-get-details-right/520788

Companies House defines a dormant company....

As the GP2 (‘Life of a company)’ Chpt 8 uncompromisingly states that ‘If a company has made no ‘significant accounting transactions’ during its financial year then it is dormant’.  

HMRC ....Consider a company to be dormant when it:

is not active ie not engaged in any business activity or receiving income or profitsholds no assets capable of producing any profits or income orholds assets that are unlikely to produce profits and income in the near future.

 

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