Dormant LLPs - A Comprehensive Guide

Ryan Patrick

• 8 min read
Dormant LLPs - A Comprehensive Guide

A dormant LLP (limited liability partnership) means the company is no longer trading and doesn't make income. Companies House requires the dormant LLP to submit confirmation statements and annual accounts. The responsibility of filing these requirements falls in the hands of designated LLP members.

This guide will help you navigate the waters of a dormant LLP. You will learn what an LLP is, why it can be dormant, and its administrative requirements. So stick around as we detail everything you must know about a dormant limited liability partnership company.

What is a Dormant LLP?

A dormant LLP is a registered limited liability partnership with the Companies House that has no active trading activities. Although an LLP may remain dormant, its details remain public to the members of the public.

As the business owner, you can decide whether to request dormant status for your company from its incorporation date or at a later stage. When your company is dormant, it's inactive and not engaged in significant accounting transactions.

A significant accounting transaction refers to those the LLP must record in its accounting documents. These transactions include assets, equity, and liabilities, including:

  1. Acquiring assets
  2. Selling assets
  3. Receiving payments for products and services
  4. Buying products or services
  5. Leasing or purchasing premises
  6. Outstanding debt by or owed by the LLP
  7. Paying LLP members or staff
  8. Managing investments
  9. Receiving interest on the company's bank account
  10. Paying professional services provider fees such as an attorney or accountant

This status changes once any of the mentioned transactions take place. You must file accounts and submit a Partnership Tax Return with the HMRC.

Certain transactions don't fall under significant account transactions that your dormant LLP may carry out.

They include:

  • Penalties for filing annual accounts after the deadline
  • A Companies House fee when altering the name of the LLP
  • Confirmation statements yearly filing fee
  • Companies House fee on the LLP re-registration

The LLP will remain dormant if no other transactions occur in the financial year.

Why Would an LLP be Dormant?

There are reasons why an LLP may be dormant from registration or a particular time, such as:

  1. Pausing trading temporarily while restructuring the company or exploring new strategies
  2. When registering an LLP to protect the partnership business name and prevent other companies from using it
  3. When the company isn't making profits, but its members don't want to wind it up at that time
  4. Preparing the LLP structure in anticipation of future business opportunities, ensuring readiness to commence trading when necessary
  5. When the LLP members want to sell the company but haven't found a buyer yet,
  6. Making the LLP dormant while preparing for sale to a new buyer facilitates a smoother ownership transition and indicates the absence of any outstanding liabilities for the business.
  7. Taking a trading break to pursue personal and professional
  8. The LLP has ceased trading and is currently in a transitional phase as it undergoes the winding-up process.

There is no legal requirement to inform HMRC or Companies House why your LLP is dormant, but you must inform them about its dormant status.

Must I Inform the HMRC when my Limited Liability Partnership is Dormant?

When your LLP is dormant, you must inform the HMRC as soon as possible by contacting them through the Self Assessment department via email, phone, or post.

This informs the HMRC that your LLP won't file the Partnership Tax Return for the dormant financial year through the self-assessment. If you fail to tell the HMRC of your LLP's dormant status, they will expect you to file a Partnership Tax Return. Additionally, you may receive a late filing penalty for not submitting it.

Remember, if your LLP was active before becoming dormant, you must submit complete accounts and a tax return for the period during which it was operational.

Must I Inform Companies House of My LLP Dormant Status?

You will inform the Companies House that your LLP is dormant when filing your annual accounts at the end of your company's financial year.

When submitting accounts to Companies House, you need to prepare dormant LLP accounts. Once these accounts are received, the Registrar will be notified of your LLP dormant status, and the information will be updated on the public register.

Despite your LLP's dormant status, you must file the annual confirmation statements and report any changes to your company details with Companies House. This ensures that the Companies House and public registrar records are up-to-date and have correct information.

Also, remember to record these changes in your LLP statutory register, like the register of people with significant control and the register of LLP members.

Administrative Obligations for a Dormant LLP

Although your LLP is inactive and there's no trading taking place, it has administrative requirements to fulfil for HMRC and Companies House.

Let's check each obligation exhaustively:

1. Preparation of Dormant LLP Accounts

Every Dormant LLP in the UK needs to prepare inactive LLP accounts. These are simplified versions of the financial statements that active trading LLPs must submit.

Dormant LLP account has:

  1. A balance sheet including statements, signed and printed by the designated LLP member, confirming that the partnership remained inactive throughout the financial year
  2. Comparative figures from previous financial years, even if there are no revenue or expenditure items for the current accounting period
  3. Specific balance sheet notes

You don't need to include the auditor's report or a profit and loss account on your dormant LLP account. However, the LLP is obligated to prepare every LLP member's full accounts and any individual entitled to receive general meeting notice.

The deadline for submitting accounts to Companies House is nine months after the LLP's accounting reference date (ARD), corresponding to the final day of the LLP's financial year.

2. Report Changes

The partnership must inform the Companies House of changes made to the LLP registered information, including changes like:

  1. the LLP's official name
  2. information of existing members such as names, residential address, service address, change of status to and from a designated member
  3. registered office address
  4. people with significant control
  5. LLP's registered email address
  6. The LLP statutory registers address
  7. appointment or removal of a member
  8. the use of SAIL address (Single Alternative Inspection Location)

Whenever you update these changes, Companies House will update the details on the public register

3. Submitting Confirmation Statement

Your partnership must submit a confirmation statement to the Companies House at least once a year, whether active or dormant. Filing the confirmation statement ensures that the Companies House holds your LLP's accurate and updated information.

If the Companies House has incorrect information, you must update the information with the appropriate LLP forms before submitting the confirmation statement.

Remember, the deadline for submitting a confirmation statement is 14 days after the LLP anniversary of:

  1. The date of the previous confirmation statement
  2. The date the partnership was incorporated at the Companies House

Confirmation statements require the £13 annual filing fee, but there is no extra charge for submitting multiple confirmation statements throughout the year.

During dormancy, designated LLP members must uphold a registered office address in the UK region where the LLP is incorporated. This address will receive official correspondence from HMRC, Companies House, and other governmental bodies.

All LLP statutory registers should be updated and ready for inspection at the registered office. These registers may also be kept at the SAIL address or the Companies House public register.

Every partnership member must have a service address to receive official, statutory communications related to their position within the partnership.

Do Dormant LLP Members Need to File Self-Assessment Tax Returns?

If you're a member of a partnership registered for Self-Assessment, you must submit a self-assessment tax return annually. This is done at the end of the financial year, irrespective of whether you receive any income from the business.

As long as the partnership remains registered with Companies House, a minimum of two members are always required. Consequently, each member who stays with the LLP must file their individual Self Assessment tax return annually.

Is Maintaining a Dormant LLP Registered Office Necessary?

All active and dormant LLPs must maintain their registered office address throughout their existence. The address must be in the UK region where the LLP is incorporated, including England & Wales, Scotland, Wales, or Northern Ireland.

When your LLP maintains its registered office address, you can receive correspondence from HMRC, court, Companies House, and other government organisations. If the appropriate registered office address is not maintained, Companies House will initiate procedures to remove the LLP from the official public register.

Is My Dormant LLP Exempted from Audits?

Under sections 480 and 481 of The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008, the dormant LLPs are eligible to request exemption from the audit of accounts if:

The company has been dormant since its incorporation at the Companies House

It has been inactive since the conclusion of its previous financial year and satisfies the following criteria:

  1. the LLP is not obligated to prepare group accounts
  2. is eligible to create individual accounts following the small LLP regime
  3. it's under the small LLP category based on that financial year or could have met the small criteria l if it were not for its ineligible group membership

However, the dormant LLP is not eligible for this exemption if, at any point during the relevant financial year, it was:

  1. an e-money issuer
  2. a MiFID investment firm
  3. a banking LLP
  4. authorised insurance company
  5. a UCITS management company
  6. LLP carrying insurance market activity

How Can I Make my Limited Liability Partnership Dormant?

You can dormant your LLP when you register it at the Companies House. If you want to keep it dormant, don't start trading. Also, you shouldn't open a company bank account or register for the Pay As You Earn or VAT.

This will guarantee that no significant accounting transactions take place, preventing your LLP from becoming active. You should also notify the Self Assessment department to inform HMRC that your new LLP is inactive.

On the other hand, things are complex if you want to change your active LLP to dormant. You must:

  1. Stop purchasing or selling products or services
  2. Withdraw all the profits from the company
  3. Ensure that all outstanding debts owed to the LLP are settled in full
  4. Pay all LLP outstanding debts and liabilities, including tax, wages, rent, utility bills, trade accounts, supplier invoices, and professional services fees,
  5. Close the partnership bank accounts or ensure there won't be any transactions taking place, including banking interest fees
  6. Notify the concerned party that the company is becoming dormant, e.g., lender, investors, staff, clients, and service providers.
  7. Terminate leases on any commercial premise.
  8. Close PAYE scheme (if applicable)
  9. Deregister the LLP for VAT in 30 days (if applicable)

If you must pay for anything LLP-related during its dormant status, ensure you pay from your personal bank account. With that, you won't forfeit your LLP dormant status.

Once you have completed all necessary arrangements and your LLP is dormant, inform HMRC by contacting the Self Assessment department.

How long can an LLP Remain Dormant?

There's no limit to how long an LLP can remain dormant in the UK. The period can vary, ranging from a few months to the entirety of the company's existence. However, the LLP designated member must carry out their administrative requirements on behalf of the company.

Although the company will remain dormant, the partnership details will be publicly available on the public register.

Form Your Company with Incorpuk Today

At Incorpuk, we will help you through the company formation process and file your confirmation statements to help your business stay compliant. Whether you're a UK resident or a non-UK resident, our team is ready to provide guidance and help you establish your company in the UK. Contact us here today.

Final Thought

Maintaining a dormant LLP entails adhering to administrative obligations outlined by both HMRC and Companies House. While dormant status allows for a pause in trading activities, designated members must ensure timely submission of dormant LLP accounts, report changes to Companies House, and fulfil other administrative requirements.

Despite dormancy status, the LLP's information remains public, emphasising the need to stay compliant. Whether transitioning an active LLP to dormancy or maintaining a dormant status from inception, thorough preparation and communication with relevant stakeholders is crucial.

There's no legal duration for LLP dormancy, but compliance with administrative duties remains paramount throughout. If you have any questions on Dormant LLPs, don’t hesitate to contact us here, and we’ll do everything we can to help.