Interpretation Of An Active Company And A Dormant Company

The tax payable on the taxable profits of a company is known as corporation tax

. The term 'company' in this regard includes registered companies, charities, clubs, societies and other organizations. A company may be considered 'active' for the purpose of corporation tax when it is trading or carrying out a business or a profession or earning income including interest or rendering services or dealing in sale and purchase of goods or managing investments.

There are a number of situations in which HMRC would not consider a company active, that is, the company would be regarded as 'dormant'. If the company has not yet engaged in any business activity, then it is not active. Business activity, here, refers to carrying out trading or profession or selling or purchasing goods so as to earn profits or revenues. Basically, a company being dormant means that it is not liable to pay corporation tax or is earning profits below the threshold of corporation tax.

A newly commenced company or organization might be looked upon as dormant even if it is engaged in some other operations or incurring expenditures. These operations, known as 'pre-trading activities', include doing planning for business and settling contracts. The expenditures, called as 'pre-trading expenditure' involve incurring costs in setting up the company.

Also, HMRC deems a company to be dormant if it was carrying out business activities or a profession earlier but not at present. If a company is held by a company formation agent with the intention to sell it, then it is not an active company. Another case in which a company is not liable to pay this tax is if it manages blocks of flats and earns only interest as income under 1,000 which is taxed at source. An organization, other than a company is deemed as dormant by HMRC for the purpose of this tax if its liability is equal to or less than 100.

If a newly formed company is not active, then it has to notify HMRC when it becomes active, that is when it starts trading or carrying out the profession. This must be informed to HMRC within 3 months after the beginning of tax year. An easy way to tell HMRC about being liable of corporation tax is through HMRC's online service of registration. You can hire chartered accountants Birmingham for handling all the affairs associated with corporation tax. If a company or organization was previously active but not now, then it has to contact Office of Corporation Tax, London. And, when this company becomes active again, then it can use form CT204 (Active company) to inform HMRC.

by: doshi

POST COMMENT

Treatments And Prevention Tips For Toenail Fungus Need And Advancement In Storage Service Metal Cutting: Various Techniques And Uses Advantages Of Php Development And Customization Flyer Printing And Their Importance In Promotions Save Time And Money With Online Shopping Finding And Hiring A Logistics & Freight Specialist: A Consultant Tells You Everything Use Your Garden This Summer And Host A Barbeque Changing Trends Of Indian Banks And Economy Plat5 Consultancy Commercial Construction And Its Arrangement How Best To Use Your Shop Layout And Displays To Get Customers Spending Outsource Web Design And Web Development India Quick Payday Loans: Easy And Instant Approach Towards Cash