Hi,
I hope this question intrigues a response as it must be an issue for many start up businesses and there is no advice on the internet!
I started a LTD company and registered for VAT as I predicted volume sales and big start up expenses.
The company is designing baby products and is now stuck in the patent process.
First years expenses were 12k design fees, 1k travel, 0.5k materials. Turnover £0.00
I go to file the CT600 and when I set turnover as 0 on the profit and loss it says 'error go back and state company was not trading.
Then I do this and it makes me tick a box saying: 'the company is dormant and has not traded in that period. It has received no income and incurred no expenditure and therefore did not make either a profit or a loss.
I cannot tick this box as I made a loss by incurring expenditure therefore how can I correctly fill out the CT600?
I have contacted HMRC perhaps hastily and I await a call back from an inspector to 'help'.
Please can someone share their wisdom?
Thanks John
Replies (19)
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Criminal offence
Would I not be better submitting dormant accounts then offsetting my losses to next years accounts?
It would be a criminal offence to deliberately falsify your company's accounts. The fact that you can ask such a question on a public forum shows that you do not understand that. The best advice anyone can give you is what you have already received. Stop what you are doing and get an accountant to help you. I would give you very similar advice if I found you suffering from appendicitis and trying to remove your own appendix with a kitchen knife.
Cannot stop laughing at this...howling!
Would I not be better submitting dormant accounts then offsetting my losses to next years accounts?
It would be a criminal offence to deliberately falsify your company's accounts. The fact that you can ask such a question on a public forum shows that you do not understand that. The best advice anyone can give you is what you have already received. Stop what you are doing and get an accountant to help you. I would give you very similar advice if I found you suffering from appendicitis and trying to remove your own appendix with a kitchen knife.
NO
Your company is not dormant.
Do yourself a big favour and appoint an accountant. See it as an investment not an expense before you do something dangerous.
Dormant?
If the company is dormant it is outside of the charge to corporation tax and so cannot incur losses. You could carry it forward as a pre-trading expense, as long as trade commenced within 7 years, but only in respect of expenses that would have qualified as a trading expense had trade been carried on at that time. If the worst happens, and the company never trades, no relief would be available at all, however being an active company if it were sold, as a loss making entity to someone who had the same or a similar type of trade the losses carried forward could be used by the purchaser, but pre-trading expenditure would not then be available.
The company, at the end of the day, is active and Basil's suggestion is the simplest solution.
Are these accounts...
... also for filing at company's house, because a company can't be dormant if it has expenses. I agree that the software isn't fit for purpose if that is its "test" of dormancy.
However, if all that has been done so far is that it has designed baby products, and applied for patents, and is waiting for those patents to be granted, before it commences manufacturing and selling those baby products, then, as a matter of fact, it isn't trading as yet; it's simply preparing to trade and is, as Paul says, incurring pre-trading expenditure.
I'd recommend that Andy's advice be taken sooner, rather than later.
Criminal offence?
The OP is not suggesting falsifying the accounts, merely using a workround to allow the CT600 to be submitted which a software glitch courtesy of our friends at HMRC prevents. Open a bank account and deposit a sufficient sum to generate income of £1 and in future no one will worry because it will be 100% right. The company is NOT dormant, it is carrying on economic activity even though the turnover is nil, hence the VAT registration, in affect as an intending trader. Submit dormant accounts and that would suggest to HMRC that there is NO economic activity being pursued and no entitlement to register as an intending trader. Make it clear in notes what is being done and I doubt anyone will lose any sleep. Criminal? There is no mens rea...
Misread
The OP is not suggesting falsifying the accounts, merely using a workround to allow the CT600 to be submitted which a software glitch courtesy of our friends at HMRC prevents. Open a bank account and deposit a sufficient sum to generate income of £1 and in future no one will worry because it will be 100% right. The company is NOT dormant, it is carrying on economic activity even though the turnover is nil, hence the VAT registration, in affect as an intending trader. Submit dormant accounts and that would suggest to HMRC that there is NO economic activity being pursued and no entitlement to register as an intending trader. Make it clear in notes what is being done and I doubt anyone will lose any sleep. Criminal? There is no mens rea...
You have misread the comment that my "criminal offence" remark was directed at. It was not about the £1 work-round, that I agree is inoffensive. It was about his suggestion that he might falsify his accounts altogether - delete the expenditure, and presumably also delete liabilities or fabricate non-existent assets to make the accounts balance. Do you advise your clients that they can make up the figures in their accounts, with no resemblance to reality, with impunity?
Just leave the turnover box empty and fill in the expense numbers. However, your case isn't one of a dormant company and you will need to attach the accounts in ixbrl form.
Dormancy
There's no legal definition of "dormant" as far as I know. I believe that any transaction which alters the company's reserves makes that company "not dormant". It's not uncommon to incur bank charges for example during a long period of inactivity - rightly or wrongly I'd do the accounts showing a loss for the period.
Defnition of a dormant company
There's no legal definition of "dormant" as far as I know.
Allow me to extend your knowledge. Dormant companies are defined in s.1169 CA 2006.
I know it's a year ago , but....
Did the OP ever get a call back from the HMRC inspector and, if so , what advice did he give to 'help'?