A company is dormant if it has had no 'significant accounting transactions' during the accounting period. A significant accounting transaction is one which the company should enter in its accounting records.
When determining whether a company is dormant you can disregard the following transactions: -
A dormant company is exempt from having an audit for that financial year if: -
Dormant companies can claim exemption from audit and need only prepare and deliver to Companies House an abbreviated balance sheet and notes. You do not have to include a profit and loss account and directors' report in dormant company accounts filed at Companies House, but you must provide a directors' report to members.
A company may not take advantage of the dormant company audit exemption if at any time in the financial year in question it: -
Nor can a company take advantage of the dormant company audit exemption if an audit is required by a member or members holding at least 10% of the nominal value of issued share capital or holding 10% of any class of shares; or - in the case of a company limited by guarantee - 10% of its members in number. The demand for the accounts to be audited should be in the form of a notice to the company, deposited at the registered office at least one month before the end of the financial year in question. The notice may not be given before the financial year to which it relates.
Dormant company accounts submitted to Companies House need not include a profit and loss account or directors' report.
Unaudited dormant accounts are much simpler than those of a trading company but must contain: -
You have the same time allowed for filing as for other accounts, and the same penalties for late filing apply.
The company will cease to be exempt from audit as a dormant company if it: -
If either of these happened, you might have to submit full accounts for the financial year in which the company ceased to be exempt, and the directors might need to appoint auditors for the company. However, it may be that the company would qualify for exemptions as a small company.