Any taxpayers that have ceased to be self-employed must advise HMRC of their change in status.
There are a number of steps that must be followed if a taxpayer stops trading as a sole trader or if they are ending or leaving a business partnership. These steps are required so that HMRC can help to get the taxpayer’s affairs in order.
Taxpayers must send in a Self-Assessment return by the relevant deadline and will need to work out their trading income, allowable expenses, and any capital allowances to the date of cessation. Taxpayers must also determine if they have any Capital Gains Tax (CGT) to pay.
They may also be able to claim back any overpaid tax or National Insurance. It is also important to check if there is an entitlement to tax relief by way of business assets disposal relief (previously called entrepreneurs’ relief), overlap relief, and/or terminal loss relief. There are also other reliefs available that may reduce the amount of CGT due.
Taxpayers that owe tax or National Insurance and have difficulty paying it, may be able to negotiate an agreement with HMRC for more time to pay. In addition, where a VAT registration was in place this will also need to be canceled and anyone who employed staff will need to close their PAYE scheme and submit final payroll reports.
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