What constitutes a trading company?

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Original Message Added : 11 May 2012

I have created a dormant limited company and informed HMRC that it is dormant and that I will notify them when it begins trading.

I am thinking about releasing free software under the company's name before I start charging for it to 'test the water'. I also intend to license my personal intellectual property to the company at zero cost and (initially) under terms which do not permit the company to generate revenue from it. My question is whether any of this activity counts as trading even though it generates no income and incurs no cost and hence whether I have to inform HMRC about it?

Thanks,

Mike

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	Mike Piper
Location :	Bristol
Joined :	11 May 2012
Posts :	2 ( 0)

Reply : 16 May 2012

Contact HMRC and explain what you intend to do and request they reply in writing. This link below helps to explain http://www.hmrc.gov.uk/ct/getting-started/trading.htm

Also contact Companies House - A dormant company must not have any accounting transactions except specific allowable transactions that it can disregard

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	Robert Dalgleish from Bookkeeping Etc Ltd
Location :	London
Joined :	18 November 2011
Contact :	Send Private Message
Posts :	166 ( 44)

Reply : 18 May 2012

My understanding is even if(I am a bit doubted did you really get your IP with no cost).

Do you need to call the IP office? It is telephone expense

Do you need to send them by post? It is postage

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	Harry Lee from SC Lee Accountant
Location :	Purley
Joined :	19 August 2008
About :	Tax and accounting Specialist
Contact :	Send Private Message
Posts :	222 ( 47)

Reply : 20 May 2012

Copyright is automatic and doesn't require any registration, hence has no cost. Will contact HMRC and see what they say.

Thanks.

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	Mike Piper
Location :	Bristol
Joined :	11 May 2012
Posts :	2 ( 0)

Reply : 5 Jun 2012

The definitions can be confusing for different purposes. For Corporation Tax purposes you need to tell HMRC when the company comes into charge for corporation tax. Generally this means when the company acquires an income stream or the means to generate income.

In your case the company has not yet come in to charge.

Here's some guidance from HMRC:When your company or organisation has not yet started trading

Generally, HMRC considers that your company or organisation has not yet become active or started trading if it has not yet engaged in any business activity. In this context, business activity means carrying on a trade or profession, or buying and selling goods or services with a view to making a profit or surplus.

Your newly-formed company or organisation may not be active. However, you may still carry out activities (known as 'pre-trading activities') or incur costs (known as 'pre-trading expenditure') before you officially open your business without HMRC deeming that you have started trading.

Activities or expenditure to do with setting up a business that are not considered trading by HMRC for Corporation Tax purposes include:

preliminary activities such as writing a business plan or negotiating contracts
preliminary expenditure such as incurring costs with a view to deciding whether to start a business

Kind regards

Barry

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	Barry John Nudds from Barry J Nudds Chartered Accountant
Location :	Bury St. Edmunds
Joined :	27 January 2010
About :	Chartered Accountant
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Posts :	109 ( 46)

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