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Dormant vs Proper Accounts?

Company has effectively never traded, what is best?

Would you file dormant accounts - was suggested by an accountant - for a LTD that was stuck the entire first year trying to sort out all kinds of issues and had not traded effectively at all yet, hence never generated any revenue whatsoever, but only had a few ancillary costs; or would you still rather go with full proper accounts?

Most importantly, the company is keen to uphold a strong image with regards to a potential acquisition in the future, as they're just about to launch a massive global operation!

So, the main question here is: What is the wisest option for the (financial) image of this company, on the short and long run?

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09th Nov 2018 21:30

I think you are asking whether to file accounts showing that the company was dormant, when it wasn’t.

The only answer you will get on here is obviously not.

As always, prepare the accounts recording the transactions that occurred. Job done.

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By JKL888
to johngroganjga
09th Nov 2018 23:14

Well, the accountant concurred that it would not be "reasonable" to file accounts for such small transactions!... And that it would be ok to file dormant as long as those few marginal transactions where carried over to next accounts filing. He also said that it would really be ok and totally understandable if ever needed to be explained at all. Also HMRC had suggested making the company dormant until starting trading. Taking this advice it became dormant indeed for a couple of months, but that was after the financial year in question here.

On the other hand, he added that filing full accounts would be the better option for the image of the company with regards to potential acquisition in the future etc...

Whilst it would actually show no revenue at all for that first year and only a couple of negligible costs!... Which all left me quite puzzled to be honest!

PS: sorry if the comment appeared twice, I'm a newbie here :)

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By JKL888
09th Nov 2018 23:15

Well, the accountant concurred that it would not be "reasonable" to file accounts for such small transactions!... And that it would be ok to file dormant as long as those few marginal transactions where carried over to next accounts filing. He also said that it would really be ok and totally understandable if ever needed to be explained at all. Also HMRC had suggested making the company dormant until starting trading. Taking this advice it became dormant indeed for a couple of months, but that was after the financial year in question here.

On the other hand, he added that filing full accounts would be the better option for the image of the company with regards to potential acquisition in the future etc...

Whilst it would actually show no revenue at all for that first year and only a couple of negligible costs!... Which all left me quite puzzled to be honest!

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to JKL888
10th Nov 2018 09:50

JKL888 wrote:

Well, the accountant concurred that it would not be "reasonable" to file accounts for such small transactions!... And that it would be ok to file dormant as long as those few marginal transactions where carried over to next accounts filing. He also said that it would really be ok and totally understandable if ever needed to be explained at all. Also HMRC had suggested making the company dormant until starting trading. Taking this advice it became dormant indeed for a couple of months, but that was after the financial year in question here.

On the other hand, he added that filing full accounts would be the better option for the image of the company with regards to potential acquisition in the future etc...

Whilst it would actually show no revenue at all for that first year and only a couple of negligible costs!... Which all left me quite puzzled to be honest!

Never read such nonsense.©

Full of misconceptions and carp advice.

Puzzled ? What's puzzling ?

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10th Nov 2018 08:45

I'm not sure which Reporting Standard "financial image" rolls under. But you should know that "dormant" means different things to different people - including HMRC.

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10th Nov 2018 09:46

Two or three years into the nonsense that is FRS 105 and we're still agonising over dormant accounts.

Not that this company is dormant. Your interlocutor is simply not correct. You must prepare accounts under FRS 105. (Or FRS 102 1A - though I wouldn't recommend that.)

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10th Nov 2018 10:07

Change your accountant. It will be obvious when you file full accounts (and you should) what your situation is

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to bernard michael
10th Nov 2018 11:23

I just don't get what's to be gained by filing dormant accounts.

Even if the company was indeed dormant.

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to lionofludesch
10th Nov 2018 14:07

some sort of disconnect between 'massive global operation', 'future acquisition' and getting this sort of advice (or even asking on AWeb). Invest in proper advice from a firm with the scale to cope with your ambitions at the outset...

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By Matrix
10th Nov 2018 21:27

There are no options here, except to find a competent accountant as already advised.

If the company was not dormant then you can’t prepare dormant accounts for Companies House.

If the company was not yet trading then it will be treated as dormant for tax purposes so no tax return will be required until it starts trading.

HMRC don’t give financial reporting advice and their use of the term dormant is different from the Companies House use.

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By frankfx
10th Nov 2018 17:45

''So, the main question here is: What is the wisest option for the (financial) image of this company, on the short and long run?''

Wisest ?...………… Wisdom not required follow the law.

( Assuming one course of action was wise and another wiser)

Option?...……….You have a choice?

Your company has global ambitions.

I therefore infer that your company must have a veritable bath tub of talent and wisdom to make a decision of this nature.

Unless , as is common these days, everything is outsourced for an opinion.

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10th Nov 2018 22:33

Having read your question, and the answers so far, I'd agree with most other posters:

1. You need an accountant who knows what to actually do.
2. I'd suggest you are going to struggle with launching a massive global operation with the skills displayed so far.

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By JKL888
11th Nov 2018 01:17

Please note: just before proceeding to read my comment, upper case in the following text is simply used to accentuate the meaning, for lack of an underlining or bold font facility here. My apologies in advance if anyone is uncomfortable with the upper case at all, in that case please don't read this comment as it contains exactly 12 upper case words.
Wait a second, 12? Now let that just be the exact number of comments on this thread he! What a lovely surprise!!! :)

With that out of the way. I'd just like to start off by thanking you all very, very much!

For all my life, I was under the clear impression that any lay person seeking any accounting advice should simply ask an accountant!

Now when that qualified ACCOUNTANT offers their advice suggesting "two COMPLETELY LAWFUL options", without me even suspecting that any of those two suggested options would be in any remote way out there in the stratosphere of possibilities unlawful or incorrect in any degree, way, shape, or form whatsoever, of course, again the unsuspecting lay person which I am and who just happens to be dealing right now as well with immense family related issues, would generally not doubt the standard, knowledge, or integrity of an accountant just off the bat!!!... Would they???!

I would have to say, having had a good read trough all the comments here, the most surprising - I should rather say shocking thing so far in this whole story, is how some comments here seem to somehow assume that just a regular lay person is actually meant and expected to know more than the OFFICIALLY QUALIFIED ADVISER, whom they sought for expert lawful advice in the first place!!!!........ Right????!!!!!

REALLY???????!!!!!!

Oh wait!!!!!

Perhaps I should instead humbly beg all those clearly agitated commenters here to forgive my clear inexplicable ignorance, for merely trying to find out whether the EXPERT ADVICE which I - with no accounting or finance background whatsoever - got from an officially authorised ACCOUNTANT, was indeed correct or not, by simply posting a question about it here, on this very forum which just happens to be specially dedicated for accounting questions!!!........

Well I am very, very, very sorry, it just seemed to me as a helpful way of getting a clear, unambiguous consensus from other accountants, about what I until then was advised to be a matter of picking one out of two "completely and equally LAWFUL options" -as far I was advised by just another qualified colleague accountant, just like yourselves!!!..........

I simply thought, whilst waiting for another highly reputable accountant I'm currently consulting as well to come back with his advice, perhaps I should pas this through a really helpful bunch, who should by all means know more about this and would really like to help out, for no other intents or purposes other than just that: to help!!!....

After all, I am immensely grateful that my gut instinct was right, and that the advice I got from that other colleague of yours claiming "two completely lawful and correct options" and that one of the two would be "better" than the other "unreasonable option", was not correct at all. This is why I felt that I should just run it past other accountants in all objectivity, just as I got it, without adding any of my own lay person's, doubts, opinions, or assumptions!!!!........... After all, this was the advice I got from him after simply explaining that the company made no income and that it went dormant afterwards. When he suggested two options I asked him what would be the better of the two given all possible scenarios, as both are right by law, he then explained that he finds that filing full accounts was unreasonable!.......

One last thing I'd like to say here: I would really like to think that if anyone who is clearly pointing fingers here and already jumping to all kinds of wild conclusions and making all sorts of horrid assumptions, had just made the simple effort of standing in my shoes for just one single moment, before hasting to accuse and judge, instead of understand and help; they would have surely realised that I may have clearly been misinformed and just came here seeking help and council, trying to find clarity and sound advice in an overwhelmingly crowded world of misinformation!!!.....

I would also guess that anyone in their right mind would simply assume that people would not just come here to publicly post any questions with any ill intentions on their minds; or - even better - just to solicit some completely unfounded judgements and blatant false accusations, just for sheer lack of anything better to do for the weekend...... Would they???!!!!.........

At the end of the day, I would personally like to think that no one would ever like to be judged by anyone else's standards!!!!...... Good grief!!!

As for me, the standard is and will always simply remain that we actually don't see things as they are, we see things as WE are".............

I would like to leave you all with this here and just thank everyone that has commented once again!!!....
Especially whoever used clear lay person's terms, and most especially everyone who just simply saw this honest question for what it really is!!!........

Thanks ever so much, one and all!!!!!!!

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to JKL888
11th Nov 2018 07:47

You say too much and don't listen enough. With the result that you hear what you want to hear and maybe misunderstand (and may be subsequently misrepresent) what has been said.

JKL888 wrote:

....this was the advice I got from him after simply explaining that the company made no income and that it went dormant afterwards.

Where did you get the idea that it went dormant afterwards? Could be why your ACCOUNTANT got the wrong end of the stick.

If from HMRC, then as I and others have said, they use the word dormant in a tax, not an accounts, sense.

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By JKL888
to Tax Dragon
12th Nov 2018 18:05

Tax Dragon wrote:

You say too much and don't listen enough. With the result that you hear what you want to hear and maybe misunderstand (and may be subsequently misrepresent) what has been said.

JKL888 wrote:

....this was the advice I got from him after simply explaining that the company made no income and that it went dormant afterwards.

Where did you get the idea that it went dormant afterwards? Could be why your ACCOUNTANT got the wrong end of the stick.

If from HMRC, then as I and others have said, they use the word dormant in a tax, not an accounts, sense.

Actually, you clearly misread too much and therefore misunderstand way too much and then go on to make up stuff out of your own colorful imagination! Quite amusing I have to say!

If you can read and understand plain English well enough, it would have been already clear to you that I am thankful I realised that filing dormant according to his advice is not lawful, even though your colleague accountant... had advised this. And by the way as mentioned earlier he explained that it's completely fine to carry those few cost made in the next annual accounts and that that would be the right thing to do, which also surprised me, but I still would not have written him off if I hadn't consulted anyone else, as he still holds the highest qualification! Whilst clearly he (your own colleague) doesn't really know what he should be doing!

Also the "idea" that it went dormant was from HMRC and of course your qualified colleague.... knows this all too well!

Let's hope you understand this by now. But if not, I'm sorry but by all means I lost all interest in explaining plain English....

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to JKL888
11th Nov 2018 09:44

JKL888 wrote:

Now when that qualified ACCOUNTANT offers their advice suggesting "two COMPLETELY LAWFUL options", without me even suspecting that any of those two suggested options would be in any remote way out there in the stratosphere of possibilities unlawful or incorrect in any degree, way, shape, or form whatsoever, of course, again the unsuspecting lay person which I am and who just happens to be dealing right now as well with immense family related issues, would generally not doubt the standard, knowledge, or integrity of an accountant just off the bat!!!... Would they???!

Unfortunately, the weakness in this otherwise compelling argument one of your COMPLETELY LAWFUL options isn't lawful.

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By JKL888
to lionofludesch
12th Nov 2018 01:17

lionofludesch wrote:

JKL888 wrote:

Now when that qualified ACCOUNTANT offers their advice suggesting "two COMPLETELY LAWFUL options", without me even suspecting that any of those two suggested options would be in any remote way out there in the stratosphere of possibilities unlawful or incorrect in any degree, way, shape, or form whatsoever, of course, again the unsuspecting lay person which I am and who just happens to be dealing right now as well with immense family related issues, would generally not doubt the standard, knowledge, or integrity of an accountant just off the bat!!!... Would they???!

Unfortunately, the weakness in this otherwise compelling argument one of your COMPLETELY LAWFUL options isn't lawful.

Errrrrm???!!! .... Has it not dawned on you yet that it has become as clear as the sun in the summer sky that your colleague's entire advice was massively incorrect?

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to JKL888
12th Nov 2018 09:30

JKL888 wrote:

Errrrrm???!!! .... Has it not dawned on you yet that it has become as clear as the sun in the summer sky that your colleague's entire advice was massively incorrect?

No colleague of mine, pal.

I only deal with competent people.

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to JKL888
11th Nov 2018 10:33

JKL888 wrote:

Thanks ever so much, one and all!!!!!!!

Another satisfied customer.©

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11th Nov 2018 01:07

Calm doon. And don't file dormant accounts for a company that has had accounting transactions in the period.

All the best!

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By JKL888
to the_drookit_dug
11th Nov 2018 01:21

Thanks.

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