What Is an Active vs Non-Trading Company for Corporation Tax?

HMRC classifies companies as active (trading) or non-trading (dormant) for Corporation Tax purposes.

An Active Company is liable for Corporation Tax if it:

• Carries out business activities or professional services.
• Buys or sells goods and assets to make a profit.
• Provides core services or earns interest on assets.
• Manages investments or receives income from other sources.

A Non-Trading Company is considered dormant if it:

- Has not yet started trading, or
- Has ceased trading and had no activity during the whole year

Dormant companies are generally not required to file a Corporation Tax return once HMRC has been formally notified of their dormant status.

<b>Important:<i> If HMRC does not consider your company dormant, you must notify them or risk penalties. Use <a href="https://www.gov.uk/tell-hmrc-your-company-is-dormant-for-corporation-tax"><i>this service<i> to inform HMRC. More info on dormant companies is available </i><a href="https://www.gov.uk/dormant-company/dormant-for-corporation-tax"><i>here<i>.</i>