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HMRC internal manual

COTAX Manual

Accounting periods: company accounting periods: dormancy

General

A company is dormant when it:

  • does not receive any profits or income
  • holds no assets capable of producing any profits, income or gains.

As a relaxation to this rule you can treat a company that merely exists to hold chargeable assets as dormant as long as the assets are unlikely to produce any profits, income or gains in the near future.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

S55 FA 2004 obliges dormant companies coming into the charge to CT to advise HM Revenue and Customs that they have done so. The legislation applies only to incorporated companies and not to members’ associations or clubs.

You can use function MAPD (Maintain AP Dates) to set up a future period of dormancy that ends on any date as long as it is followed by a live AP, if you know the following information.

  • A new company, which has been dormant since incorporation, is coming within the charge to CT for the first time.
  • A previously active but currently dormant company intends to come back into the charge to CT.

COTAX has a signal to show that a company may not have met its S55 obligations.

For newly incorporated companies, COTAX issues form CT41G the day after the record is set up. The form advises them of their obligations under S55.

When you set up a future dormancy period that is followed by a live AP, the ‘S55 satisfied ‘signal is set to ‘N’ for incorporated companies only. You should indicate in function MAPD that you do not want a form CT204 to be issued.

You can set up a future period of dormancy that is not followed by a live AP as long as it ends on 31 May.

COTAX action for S55 cases

Each day COTAX scans its database to identify companies with a future dormancy period that ends within the next 28 days and is followed by a live AP.

If you have not inhibited the issue of form CT204 when revising the AP structure using function MAPD, COTAX then:

  • issues form CT204 to the company
  • automatically records the date that the form has been issued and displays the issue date in Function VTPR (View Taxpayer).

As the company has already informed us that it is becoming live, this is not considered to be good customer service. You should therefore always inhibit the issue of form CT204 in these circumstances.

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Action in the office responsible for CT processing

You may receive correspondence, such as a set of dormant accounts, a return or a letter from the company or its agent that suggests a company should be treated as dormant.

You should review the correspondence and deal with in line with the action guide at COM1042 before deciding if the company can be treated and noted as such on COTAX. When you review the case you should:

  • consider S55 FA 2004 implications
  • make a risk assessment and decide whether to use function MAPD (Maintain AP Dates) to amend the AP record to create one or more live APs or
  • leave the existing dormancy period as it is.

See:

  • COM1041 for a list of forms relevant to this subject
  • COM1021 for a list of functions to use in particular situations
  • COM1022 for legislation applying to this subject.