Dormant or Active Co?

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Hi All,

A company incorporated few years back have a bank account but with no activity in it so till now there are no accounting records and the company is dormant in HMRC. However, recently, the owners (with good lawyers invloved) used the company to own shares on behalf of others (i.e nominee ownership). As a result, the beneficial owners deposited funds into the company account which were invested then in deals. The deals were subsequently closed and sale proceeds received. The money received was then paid to actual benefical owners of the shares (money in/out of bank account). The structure was known at all time to all the parties involved so there are no questions about KYC/AML etc. I have the below two questions:

1. Shall we recrord the transactions in the accounting books of the Company although all the activity in the bank account was on behalf of other individuals and the company did not make a single pence?

2. For HMRC, point of view, will this activity make the company active rather than dormant? As said earlier, the company did not do any operations for itself but bank account shows large amounts of transactions?

 

Thanks.

 

Replies (7)

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Scalloway Castle
By scalloway
12th Oct 2020 21:54

Your company is called dormant by Companies House if it’s had no ‘significant’ transactions in the financial year.

Significant transactions don’t include:

filing fees paid to Companies House
penalties for late filing of accounts
money paid for shares when the company was incorporated

The transactions you describe mean it isn't dormant.

Thanks (1)
RLI
By lionofludesch
13th Oct 2020 06:59

Penny.

I vote active too for CH purposes.

It might still be dormant for HMRC if there's no income.

Thanks (1)
Replying to lionofludesch:
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By Nest
13th Oct 2020 13:35

Thanks.
How will the situation change if there was a small income for few hundred £ to cover bank charges?

Best Regards.

Thanks (0)
Replying to Nest:
Melchett
By thestudyman
13th Oct 2020 13:48

Nest wrote:

Thanks.
How will the situation change if there was a small income for few hundred £ to cover bank charges?

Best Regards.

As mentioned above by Scalloway, bank charges do not fall under the criteria of costs to be classed as a dormant company, so it is by definition, not dormant.

Income which is not the payment f0r shares is also not dormant.

In most cases, a dormant company anyway would not tend to have a bank account.

Thanks (1)
Replying to Nest:
RLI
By lionofludesch
13th Oct 2020 13:48

It won't.

I can never understand the magic of a dormant company. What's the attraction?

Thanks (0)
Replying to lionofludesch:
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By Nest
13th Oct 2020 19:10

Thanks to all for the comments.

Well, it depends on situations. Some people open companies to reserve names others keep it for future use.

In our case, it is a Partnership Structure, so it was required to open few companies to enable the launch of the partnership i.e companies such as a General Partner (GP) a Carry LP, a GP of the Carry LP and (in some cases) multiple GPs for parallel partnerships. These companies will be used once the underlying Partnerships sell assets and make money. Till that time only one GP is mainly used to incur management expenses in return of management fee.

Happy to discuss further if required and once again thanks for the comments. They are very helpful.

BPR.

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Replying to Nest:
RLI
By lionofludesch
13th Oct 2020 21:42

Nest wrote:

Thanks to all for the comments.

Well, it depends on situations. Some people open companies to reserve names others keep it for future use.

That's not really what I meant.

What's wrong with FRS 105 ? There are proba ly no extra disclosures for an almost dormant company ? Why is it so important to be dormant ?

Thanks (2)