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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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?
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.
Check out my article on this very subject....
Dormant companies: Get the details right 08.11.11
https://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.