FID Trust International

In order to take advantage of the audit exemption, the company must be both dormant and qualify as ‘small’. If the company has traded in the past, then in order to qualify as small in a particular financial year it must meet the qualifying conditions in that year and in the preceding financial year.

The qualifying conditions are that at least two of the following must be met:

  1. the annual turnover must be £5.6 million or less;
  2. the balance sheet total must be £2.8 million or less;
  3. the average number of employees must be 50 or fewer.

Dormant companies that are eligible and wish to take advantage of it can claim exemption from audit:

  1. Private companies that are dormant need only prepare and deliver to Companies House an abbreviated balance sheet and notes. A profit and loss account and directors’ report do not have to be included in dormant company accounts filed at Companies House; but a directors’ report and possibly a profit and loss account – if the company traded in the previous financial year – must be provided to members.
  2. Public companies that are dormant must prepare and deliver to Companies House a balance sheet and notes, directors’ report and possibly a profit-and-loss account, if the company has traded in the previous financial year.

Provided the accounts are prepared so that they comply with the requirements, they do not have to be drawn up by a professional accountant. However, if you are in any doubt about how to prepare a set of accounts, an accountant will be able to advise you.

Form DCA (Dormant Company Accounts) is not suitable for all dormant companies. For simplicity the form has been designed to reflect only the issue of shares to subscribers who agreed to take such shares under the memorandum. The form cannot be used to record other transactions. The flowchart below shows when a Form DCA can be used and when a more detailed balance sheet format shown at the Appendix is required.

Note: Do not use this form if preparing accounts in accordance with International Accounting Standards (IAS).

Dormant companies can claim exemption from audit and need only prepare and deliver to Companies House an abbreviated balance sheet and notes. A profit-and-loss account and directors’ report do not have to be included in dormant company accounts filed at Companies House but a directors’ report must be provided to members.

The following must be given as notes to the balance sheet:

  • accounting policies, including those relating to depreciation and diminution in value of assets;
  • if shares of more than one class have been allotted, the number and aggregate nominal value of shares of each class allotted;
  • information relating to any redeemable shares allotted;
  • information relating to any shares which have been allotted during the financial year;
  • information about fixed assets;
  • details of indebtedness;
  • basis on which sums originally in a foreign currency have been translated into sterling;
  • in respect to every item above (other than fixed assets) the corresponding amounts for the previous year;
  • details of any subsidiary undertakings and of shares held in them, and why group accounts are not required;
  • where the company has acted as an agent for any person, the fact that it has so acted;
  • and information about financial fixed assets that could have been included at fair value but which have been included in the accounts in excess of their fair value, and where no provision has been made for their diminution in value.

In addition, the following information may have to be given about the subsidiary undertakings:

  1. details of any undertakings in which the company has a ‘significant holding’, for example, the name and address of the business;
  2. the name of the company’s ultimate parent company, and (if known) its country of incorporation;
  3. the names of certain intermediate parent companies, and their countries of incorporation or (if not incorporated) the addresses of their principal places of business;
  4. and details of certain loans, guarantees and other such dealings made by the company in favour of directors and others.

Companies dormant since incorporation

These companies may be able to file their statutory accounts at Companies House by completing Form DCA. But the form is only suitable where any fees or penalties noted above are paid by a third party without any right of reimbursement.

You can file Form DCA on-line. Please visit www.companieshouse.gov.uk  to access the webfiling service.

Form DCA can be completed each year for as long as the company remains dormant and meets the conditions:

  1. the issue of shares to subscribers who agreed to take such shares under the memorandum;
  2. fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns;
  3. and late filing penalties imposed by the Registrar of Companies.

Companies that have become dormant

These companies must be dormant for the current financial year, but will have entered into transactions in earlier periods. These transactions may have resulted in residual balances appearing on the balance sheet in the current year. If so, Form DCA is not suitable as it has no provision for these balances. If there are no residual balances, other than those relating to the issue of subscriber shares, Form DCA may still be suitable.

Otherwise, the reporting and disclosure requirements for these companies can be diverse and complex.

Note: Any company will cease to be exempt from audit as a dormant company if it:

  1. begins commercial or trading activities during the financial period;
  2. or would no longer qualify for some other reason.

If either of these happened, full accounts would be required for the financial year in which the company ceased to be exempt, and the directors might need to appoint auditors for the company. It may be that the company would qualify for exemptions as a medium-sized or small company.

Please contact us by telephone 0207 439 3400 (0044 207 439 3400 – International) or E-mail if you wish to join our growing list of clients.