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CT computation question & when can a company become dormant

appleapple Settling In NicelyRegistered Posts: 39
my client has a one director managed company. There were no sales during the year but some expenses (bank account charge) occured therefore the company made losses. Since the yearly depreciaton charge should be added back to calclulate CT the company made profit so CT is payable. My client would like the company to be dormant but I am not sure how this is possible. the assets have not been amortised fully yet so there would be depreciation charge in the next 2 years so CT would be payable again.
Can the company be dormant or because of depreciation CT should be paid every year.
thanks

Comments

  • BeccaLouJ9BeccaLouJ9 Experienced Mentor DevonFMAAT Posts: 1,022
    Would the depreciation add back not just cover the depreciation on the p&l and therefore cancel it out rather than creating a profit?

    B (not MIP) :)
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,431
    I would have thought that by definition a dormant company can not have any transactions affecting its accounting records, so there should not be any depreciation charge recorded.
    I am not sure though whether a deferred tax provision (CT on the difference between NBV and capital allowances claimed) should be reversed at this stage?
  • CeeJaySixCeeJaySix Well-Known Registered Posts: 645
    http://www.legislation.gov.uk/ukpga/2006/46/section/1169 - I'm going with no, as depreciation is a significant accounting transaction in that it is necessary to disclose with reasonable accuracy the financial position of the company at any given point.

    Not sure how you're getting a profit from adding back a deduction either...
    MarieNoelleBeccaLouJ9Gem7321
  • appleapple Settling In Nicely Registered Posts: 39
    Thanks for your replies. Because of the yearly depreciation the company can not become dormant, 2 more years to amortise the assets the company has. Even if the company has no other activities except amortisation can not be dormant. Is that right?
  • JawzJawz New Member West MidlandsRegistered Posts: 53
    HMRC definition of a dormant company is: “… a company that’s not active, not liable for Corporation Tax or not within the charge to Corporation Tax.”

    Therefore my guess is, if you're absolutely sure that CT is payable, then it is likely that your client's company is not dormant.
  • CeeJaySixCeeJaySix Well-Known Registered Posts: 645
    Oh look, an echo! B)
    Gem7321
  • JawzJawz New Member West MidlandsRegistered Posts: 53
    edited July 2015
    Haha mrme89 stop echoing! :)

    Also, I don't think I am wrong though but if I am, could you please correct me, and tell me what the HMRC guidelines/definitions are? Thank you

  • JawzJawz New Member West MidlandsRegistered Posts: 53
    edited July 2015
    Not a problem mrme89, and you're absolutely spot on about relying on HMRC guidelines! I ought to know better :) Many thanks :+1:
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