How to Close a Limited Company That Never Traded

Introduction

At Towerstone Accountants we provide specialist limited company accountancy services for directors and owner managed businesses across the UK. We created this webpage for people running a company who want clear answers on tax, payroll, Companies House duties, and day to day compliance without jargon. Our aim is to help you understand your responsibilities, reduce the risk of penalties, and know when to get professional support.

Closing a limited company that never traded sounds simple, and in many cases it is, but I regularly see directors trip up because they assume that doing nothing is enough. A company does not disappear just because it never issued an invoice or opened a bank account. Once a company is incorporated, it has legal responsibilities until it is formally closed, even if it was dormant from day one.

In my experience, many of these companies were set up with good intentions, perhaps for a future business idea, a contract that never materialised, or on the advice of someone who said “you can always use it later”. Over time, the company is forgotten, deadlines are missed, and directors are surprised to receive letters from Companies House or HMRC years later.

In this article, I am going to explain exactly how to close a limited company that never traded, what “never traded” really means in legal and tax terms, what filings are still required, how to deal with HMRC and Companies House properly, and how to avoid problems during and after closure. This is written from a practical UK perspective, based on how these closures actually work in real life.

What does “never traded” actually mean

Before closing a company, it is important to be clear on what never traded means.

A company that never traded is one that:

• Never issued invoices
• Never received trading income
• Never provided goods or services
• Never carried on business activity

However, a company can still be classed as dormant even if certain limited transactions took place.

For example, a company can still be dormant if it only had:

• Share capital paid in on incorporation
• Companies House filing fees
• Penalties paid to Companies House

These are known as permitted statutory transactions and do not count as trading.

If anything beyond this happened, such as paying accountancy fees, opening a bank account with activity, or buying equipment, the company may no longer be dormant. That does not prevent closure, but it changes the steps involved.

Why a non trading company still needs to be closed properly

Once a company is incorporated, it exists as a legal entity. Until it is formally dissolved, it continues to have obligations.

These include:

• Filing confirmation statements
• Filing accounts, even if dormant
• Maintaining accurate company details

Ignoring a non trading company does not make it go away. In fact, dormant companies that are ignored often end up being struck off by Companies House, which sounds convenient but can cause problems if it happens without proper preparation.

Two ways a non trading company can be closed

There are two main ways a company that never traded can come to an end:

• Voluntary dissolution initiated by the directors
• Compulsory strike off initiated by Companies House

While both result in the company being removed from the register, they are not the same, and in my professional opinion, voluntary dissolution is almost always the better option.

Why voluntary dissolution is usually best

Voluntary dissolution means you take control of the process.

It allows you to:

• Ensure all records are correct
• Close things cleanly
• Avoid uncertainty
• Reduce the risk of future issues

Relying on Companies House to strike the company off for non compliance can create problems if HMRC or another party objects, or if the company needs to be restored later.

Step one: confirm the company is truly dormant

The first step is to confirm whether the company has genuinely never traded.

You should review:

• Bank accounts, if any existed
• Invoices issued or received
• Expenses paid
• Contracts entered into

If the company truly never traded and only had permitted statutory transactions, it can be treated as dormant.

If you are unsure, it is worth checking properly rather than assuming, as this affects what needs to be filed before closure.

Step two: deal with HMRC

Even if a company never traded, it may still appear on HMRC’s systems.

In some cases, HMRC is never aware of the company. In others, the company may have been registered for Corporation Tax automatically.

You should contact HM Revenue and Customs to confirm the company’s status and tell them that the company never traded and is being closed.

HMRC may ask for:

• Confirmation that there was no trading
• A final dormant Corporation Tax return
• Written confirmation of cessation

If HMRC confirms that no return is required, keep a record of that confirmation.

Do not assume HMRC will automatically know the company is dormant just because nothing happened.

Step three: file any outstanding confirmation statements

A very common issue with never traded companies is overdue confirmation statements.

Even dormant companies must file confirmation statements every year.

Before applying for dissolution, you should:

• Check the Companies House record
• File any overdue confirmation statements
• Ensure company details are accurate

Leaving confirmation statements outstanding increases the risk of objections or delays.

Step four: file dormant accounts if required

Depending on how long the company has existed, you may need to file dormant accounts before closing it.

Dormant accounts are very simple, but they are still required unless Companies House confirms otherwise.

If the company is overdue accounts, it is often best to file them before applying for dissolution, even if they are late.

This reduces the risk of Companies House or HMRC objecting to the closure.

Step five: check for any assets or liabilities

Even a company that never traded can sometimes have assets or liabilities.

These might include:

• Money in a bank account
• Share capital
• Outstanding penalties or fees

Before closing the company, any assets should be dealt with and any liabilities settled.

If the company has money in a bank account, it should usually be withdrawn and the account closed before dissolution. Once a company is dissolved, any remaining assets pass to the Crown.

Step six: close the company bank account

If the company ever had a bank account, it should be closed before applying for dissolution.

You should:

• Ensure the balance is nil
• Download and retain statements
• Confirm no further charges will arise

Leaving a bank account open during or after dissolution can cause unnecessary complications.

Step seven: apply for voluntary dissolution

Once everything is in order, you can apply to dissolve the company.

This is done by submitting form DS01 to Companies House.

By submitting this form, you are confirming that:

• The company has not traded
• It has no outstanding liabilities
• All interested parties have been informed

There is a small filing fee, and the form can usually be submitted online.

What happens after the dissolution application is submitted

After the application is submitted, Companies House will:

• Publish a notice in the Gazette
• Allow a period for objections
• Proceed to strike the company off if no objections are raised

This process typically takes around two to three months.

During this time, the company must not trade or carry out any activity other than what is necessary to complete the closure.

Who can object to the company being dissolved

Certain parties can object to a dissolution.

These include:

• HMRC
• Creditors
• Other interested parties

For a company that never traded and has no liabilities, objections are uncommon, provided everything has been handled properly.

What happens once the company is dissolved

Once the company is dissolved:

• It legally ceases to exist
• It cannot trade or enter into contracts
• It no longer has filing obligations

However, directors should still retain records for at least six years in case of future queries.

What if Companies House strikes it off instead

If a dormant company is ignored, Companies House may eventually start strike off action for non compliance.

While this also results in dissolution, it is less controlled.

Problems can arise if:

• HMRC objects
• You later need to restore the company
• Assets were left behind

Restoration can be expensive and time consuming, which is why I rarely recommend relying on strike off by default.

Can a dissolved dormant company be restored

Yes, in some circumstances.

A company can be restored if:

• It was struck off in error
• There is a legal or financial reason
• HMRC requires it

Restoration involves fees, paperwork, and bringing filings up to date, which can be disproportionate for a company that never traded.

Common mistakes I see with never traded companies

Based on my experience, the most common issues are:

• Assuming no filings are required
• Ignoring confirmation statements
• Leaving bank accounts open
• Not informing HMRC
• Relying on automatic strike off

Almost all of these cause unnecessary stress and can be avoided with a clean voluntary closure.

How long does the whole process take

If everything is in order, closing a non trading company usually takes:

• A few days to prepare and file paperwork
• Around two to three months for dissolution to complete

Delays usually arise where filings are overdue or HMRC has not been informed.

How to avoid problems in the future

If you think you may set up a company again in the future, it is worth remembering:

• Only incorporate when you are ready to use it
• Set reminders for Companies House filings
• Review dormant companies annually

Setting up companies “just in case” often leads to forgotten obligations.

Final thoughts

Closing a limited company that never traded is usually straightforward, but only if it is done properly.

Even a dormant company has legal responsibilities, and ignoring them can lead to strike off action, objections, or the need for restoration later.

In my professional opinion, the best approach is always to take control. Confirm the company’s status, deal with HMRC, bring filings up to date, and apply for voluntary dissolution. It costs very little, takes limited time, and gives you certainty.

A company that never traded does not have to become a lingering problem, but it does need to be closed correctly.

You may also find our guidance on how to close a limited company and what happens if i file my company accounts late helpful when exploring related limited company questions. For a broader overview of running and managing a company, you can visit our limited company hub.