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Dormant company and no significant transactions

jiltjilt Font Of All KnowledgeRegistered Posts: 2,903
A company can be dormant if there are no significant transactions in the accounting period.

Would an accountant's fees to file dormant accounts etc be classed as significant transaction?

Can't quite get my head round this one! :huh:

Comments

  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    Yes, an accountancy payment or accrual is certainly significant.

    Even bank charges are significant.

    I think the only things that are not significant are Companies House related payments, e.g. formation, annual return, share capital.

    It would be interesting to know whether or not your set of accounts require a "going concern" note because is sounds like the reserves will be in deficit.
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    "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:

    payment for shares taken by subscribers to the memorandum of association;
    fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns; and
    payment of a civil penalty for late filing of accounts."

    http://www.companieshouse.gov.uk/about/gbhtml/gp2.shtml#ch8
  • jiltjilt Font Of All Knowledge Registered Posts: 2,903
    Well thats what I thought but it was worth asking. So if my client wanted to go travelling for a year or two she either couldn't make the company dormant, could not engage my services and do everything herself, or I do the work for free?! I've already told her that there must not be any significant transactions, even gave an example of saying the phone bill for January could not be paid in February. She's asked how much I would charge to look after a dormant company ie file dormant accounts etc and now I'm at a loss of what to say :confused1:

    Oh and there were reserves at 31st January 2012, it just depends what profit is made this year and what dividends are taken.

    Edit: Thanks for the link Reader I did have a quick look last week. Suppose the simple answer is she doesn't make it dormant and I'd just continue to file accounts etc but would charge only a small fee as very few transaction.

    Sometimes I just can't see the wood for trees!!!
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    jilt wrote: »
    Suppose the simple answer is she doesn't make it dormant and I'd just continue to file accounts etc but would charge only a small fee as very few transaction.

    I agree
  • groundygroundy Trusted Regular Registered Posts: 495
    Jilt

    As long as their is no trade you can charge for filing the accounts as dormant. We do this all the time and have done for 14 years. We charge £100 plus VAT and omit from company accounts as the fee would be paid by the director as the company has no trade.

    No need to over complicate
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    groundy wrote: »
    Jilt

    As long as their is no trade you can charge for filing the accounts as dormant. We do this all the time and have done for 14 years. We charge £100 plus VAT and omit from company accounts as the fee would be paid by the director as the company has no trade.

    No need to over complicate

    Warning: Please do not continue to read if you hate pedantic points:

    Personally I would have thought that it would be better for the company to charge accountancy fees through their accounts in order to build up losses in the company in anticipation for future profits.

    It was my belief that if the invoice is addressed to the company then the invoice should be recorded in the company's accounts regardless of whether or not the company actually pays for it.

    I don't understand how DRing accountancy and CRing creditors can be described as "to over complicate"? If that's complicated I would love to see an easy set of accounts!

    I don't really understand what "14 years" has got to do with the situation, potentially you could have been preparing accounts incorrectly for 14 years!

    Companies house guidance regarding dormant accounts and significant transactions (i.e. accountancy fees) is quite clear, please find my link above. I suggest you have a read of the guidance and call the ICAEW for more information.

    I did warn you about my pedantic-ness :) Big apologies in advance! Don't hate me.
  • wildgoose1ukwildgoose1uk Well-Known Registered Posts: 200
    I'm with Groundy. £100 for a dormant company accounts sounds reasonable. If you have transactions you then have to prepare a full set of accounts which would cost the company a lot more.

    Entering the transactions would be overcomplicating it and even the small fee would be considerable more than £100 as there is considerably more work involved.
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    I'm with Groundy. £100 for a dormant company accounts sounds reasonable. If you have transactions you then have to prepare a full set of accounts which would cost the company a lot more.

    Entering the transactions would be overcomplicating it and even the small fee would be considerable more than £100 as there is considerably more work involved.

    Why would there be considerably more work involved? Surely it is just three journals (reversal, accrual and payment)? E-mail draft accounts to the client and ask if there are any other out of pocket expenses, and then submit. Job done.

    Also, I don't think anyone should be saying because there's "considerably more work involved" I'm going to ignore the guidance and prepare dormant accounts even though dormant accounts are not appropriate.
  • groundygroundy Trusted Regular Registered Posts: 495
    Dormant accounts are appropriate as the company is not trading hence dormant. Apologies if I've been doing it wrong for 14 years but I've had no objections from Co House or HMRC. I think sometimes you have to agree to disagree. I do not feel the payment of an accountancy invoice implies trade, you obviously disagree Reader. I was only passing comment to assist Jilt.

    My comment with regards to over complicating was meant as sometimes we as accountants can overthink things and take minor guidance as to literal. As said previously I don't believe an accountants fee for preparing dormant accounts constitutes carrying out a trade.

    I have prepared somer accounts recently were the client insisted the company was dormant. However there were several transactions with regards to brought forward debtors and creditors and the director had withdrawn significant amounts from the company bank account and therefore I prepared full accounts. However, most dormant companies I deal with tend to have been set up but never got round to commencing trade and therefore we file as dormant.
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Can I just add, you can't file a DCA for these if a company has previously traded. It has to be standard ABBRV accounts. DCA (Dormant company accounts) are for companies that have never traded.

    Eseentially, you will be filing the same abbreviated balance sheet as last year, +/- bank interest and accountancy fees. There is minimal work involved in posting those as you have to prepare ABBRV not DCA anyway.
  • groundygroundy Trusted Regular Registered Posts: 495
    Monsoon wrote: »
    Can I just add, you can't file a DCA for these if a company has previously traded. It has to be standard ABBRV accounts. DCA (Dormant company accounts) are for companies that have never traded.

    Thanks for that Monsoon I wasnt aware of that.
  • jiltjilt Font Of All Knowledge Registered Posts: 2,903
    Thanks for your replies guys, sorry for the delay in reponding was out of the office all day yesterday, family crisis!

    I have informed my client that she can't go dormant, I did find out that form AA02 could not be used as she had already traded but wasn't aware before, thanks for pointing that out Jenni.

    And apolgies for causing a bit of friction on this thread,

    Thanks again.
  • groundygroundy Trusted Regular Registered Posts: 495
    Friction what friction :001_tt2:
  • kumbrodykumbrody Registered Posts: 1
    jilt said:

    A company can be dormant if there are no significant transactions in the accounting period.



    Would an accountant's fees to file dormant accounts etc be classed as significant transaction?



    Can't quite get my head round this one! :huh:

    Yes, an accountancy payment or accrual is certainly significant.It has to be standard ABBRV accounts. DCA (Dormant company accounts) are for companies that have never traded. You can visit the following link http://www.nusourcefinancial.com/ to know more about dormant account.

    Companies house guidance regarding dormant accounts and significant transactions (i.e. accountancy fees) is quite clear.

    Jawz
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