Choosing between permanently shutting down your business and leaving it inactive is a difficult choice. Before taking that action, investigate the repercussions of your choices. We are here to assist.
When a door shuts, another opens. If you are considering launching a new business, Fintech Harbor Consulting can assist you with making it official. We can help you set up your company registration UK.
What is an inactive company?
According to the UK’s Companies House, your business is deemed inactive if it did not participate in “major” transactions throughout the fiscal year. Simply stated, if your company is inactive, it indicates that it has not conducted any commercial operations but is nonetheless visible and searchable on the Companies House Register of Companies.
These noteworthy deals exclude the following:
- Companies House filing fees Penalties for late submission of financial statements
- Capital paid for shares at the time of your company’s incorporation.
- Even though your business is defunct, you will still be required to submit documents with Companies House. This applies to all previously registered corporations with the Companies House.
Why Should I Retire My Business Rather Than Shutting It Down?
First, you must understand what being inactive will mean for you and your company. This will help you pick this option.
There are many reasons to take a break from running your business, but there are also advantages to sleeping in it.
- Reduce administrative and maintenance expenses
Dormant corporations don’t benefit from business activity as they would if they were active. Companies House allows inactive small companies to file ‘dormant accounts’ without an auditor’s report.
- Payment of Business Tax
Once you have notified HM Revenue and Customs (HMRC) that your limited company is inactive, you are not required to pay Corporation Tax or submit another Company Tax Return until you get a reminder to do so. However, remember that you will still be required to submit yearly accounts.
- Take a break from operating your business.
Keeping your business alive but inactive allows you to perform the following:
- Take as much time off as you like.
- Retire without concern about business issues.
- Transfer the business to your preferred successor when you so want.
- Return to working as a full-time worker
- Take time off to help someone in your family.
- Recover from a sickness
- An unexpected necessity to relocate temporarily abroad
How Long Can My Business Remain Dormant?
There is no time restriction on how long a firm may be inactive. You may continue for as long as you choose.
If you are on the fence about whether to restart your firm, one alternative for you is to keep your company alive while reducing its operating expenses.
How Do I Put My Company Dormant?
It is rather straightforward to declare your firm inactive.
- Inform HMRC that your business is inactive
You may tell HMRC that your firm is dormant, and you’re no longer getting money from it. If you haven’t received a Company Tax Return notice, call or contact HMRC. If you’ve already filed a return, you must complete an online Business Tax Return to alert HMRC.
- Pay off past due bills
These expenditures may include rent for office space, insurance, and web services, among others. Before cancelling any agreements, be sure all due and expected payments are fulfilled.
- Cancel your current VAT and PAYE accounts
Next, consider employees and VAT (VAT). Until you start a company, submit “NIL” VAT returns. Your VAT registration must be canceled within 30 days. Also, handle your employees’ payrolls and PAYE.
What If I Decide to Restart the Management of My Business?
For corporations that have traded in the past, you should do the following:
- Register for Business Tax. This will demonstrate to HMRC that your business is active.
- Send Companies House your accounts within nine months after reopening.
- Corporation Tax must be paid within nine months.
- Send HMRC a Company Tax Return within 12 months after the conclusion of your company’s fiscal year.
Fintech Harbor Consulting can help with both business registration in the UK and company registration in Hong Kong.