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When is a company dormant for Corporation Tax?

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Corporation Tax

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10 September 2026

A company can be dormant for Corporation Tax once it stops trading and has no other income. When is a company dormant for Corporation Tax? We explain what counts as trading, how to tell HMRC, and the Companies House and VAT duties that continue.

When is a company dormant for Corporation Tax?

A company does not have to close formally to become dormant. Instead, it is usually treated as dormant once it stops trading. However, it must also have no other income, such as investment income.

A new limited company can be dormant too. This applies when it has not yet started trading. Other examples include certain flat management companies. Similarly, unincorporated associations or clubs owing less than £100 in Corporation Tax can qualify.

What counts as trading?

First, you need to understand what HMRC treats as trading. Consequently, dormancy is narrower than many directors assume. Trading activities can include:

buying or selling goods and services
renting out property
advertising
employing someone
receiving interest

Therefore, a company should review its activities carefully. Do not simply assume dormancy because business has slowed down.

Telling HMRC

If your company has stopped trading and has no other income, tell HMRC. You can then be treated as dormant for Corporation Tax purposes. However, timing matters here.

HMRC may have already issued a notice to deliver a Company Tax Return. In that case, the company must still file a return. That return should show that the company was dormant for the relevant period.

Once HMRC accepts dormant status, the position becomes simpler. Generally, the company no longer pays Corporation Tax. Likewise, it does not file further Company Tax Returns unless HMRC issues another notice.

Your other obligations continue

Importantly, dormancy does not remove your Companies House duties. A limited company must still file annual accounts. In addition, it must still file its confirmation statement each year.

VAT also needs attention. If the company is VAT registered and will not trade again, deregister within 30 days of becoming dormant. Alternatively, if you plan to restart trading, keep submitting nil VAT returns. You can find guidance at https://www.gov.uk/dormant-company.

So, when is a company dormant for Corporation Tax in practice? Review the position carefully, especially where a company stops trading but still has financial activity.