Can HMRC investigate a dormant company?

Dormant means the company currently has no significant accounting transactions, not that it's exempt from scrutiny. HMRC can still open an enquiry into any corporation tax return the company filed while it was trading.

The dormancy itself doesn't create a new time limit or block HMRC's existing powers. If the company traded three years ago and is dormant now, HMRC can still enquire into that earlier return within the normal window.

Dormant companies also sometimes attract HMRC's attention precisely because trading stopped shortly before, or shortly after, a period HMRC wants to check.

Paragraph 24 Schedule 18 Finance Act 1998 gives HMRC the power to enquire into a company tax return. The normal window is 12 months from the date the return was delivered, or the filing date if the return was late.

That window applies to the return, not to the company's current trading status. If HMRC opens an enquiry inside that window, dormancy afterwards doesn't stop or shorten it.

Outside the normal enquiry window, HMRC can still raise a discovery assessment if it finds an under-assessment it couldn't reasonably have known about earlier. The time limits then depend on behaviour: broadly four years for reasonable care, six years for carelessness, and twenty years for deliberate errors.

Dormancy for corporation tax purposes is a separate concept from Companies House dormant company accounts. Telling Companies House the company is dormant doesn't automatically tell HMRC, and HMRC decides dormancy for tax based on its own review.

If your company has stopped trading and gone dormant, keep all records from the active trading period. HMRC can still ask for them if it opens an enquiry, even years after the company went quiet.

If HMRC writes to you about a dormant company, don't assume it's a mistake. It usually relates to a return filed while the company was active, or to a discrepancy HMRC has spotted between filings.

Directors sometimes let a dormant company lapse without proper closure, thinking dormancy is the end of the matter. HMRC can still pursue tax due from the trading period regardless of the current dormant status.

If the company is later struck off while an enquiry is open, or before one starts, that raises separate issues covered in our page on HMRC investigating a closed company.

If HMRC's enquiry finds extra tax due from the active period, interest runs from the original due date, and a penalty may apply depending on how careless or deliberate HMRC considers the original error to have been.

Responding properly to a dormant company enquiry still needs proper representation, even though the company isn't currently trading. Records may be harder to gather the longer the gap.

Growth plan clients have free tax investigation insurance included, covering professional costs of dealing with an HMRC enquiry even after the company has gone dormant. See /fees for details.

Don't destroy company records once trading stops. You generally need to keep corporation tax records for at least six years from the end of the accounting period.

Don't assume dormant company accounts filed at Companies House settle the tax position with HMRC. The two filings serve different purposes and different bodies.

Don't ignore HMRC letters addressed to a dormant company on the basis that there's nothing left to collect. Personal liability can follow in some circumstances, particularly around unpaid PAYE.

Don't strike the company off while records are incomplete or a query is outstanding. It can complicate, rather than end, an enquiry.