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The decision to close or sell a business can be difficult and stressful. But careful planning can help.
It is important to let HM Revenue & Customs (HMRC) know as soon as possible if you stop trading or close your business. This is so that they can help to get your tax and National Insurance in order. If you owe tax or National Insurance and have difficulty paying it, you may be able to negotiate an agreement with HMRC for more time to pay. And in some circumstances, you may even be able to claim back some tax or National Insurance.
This guide explains how to let HMRC know and what you need to do to finalise your tax.
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There are different areas of HMRC that you need to tell that you’ve stopped trading or you’re selling your business. This depends on your circumstances, such as whether you have employees or you’re VAT registered.
If you’re a self-employed sole trader or business partner you can tell HMRC you’ve sold or closed your business using an online form. The form covers Self Assessment and National Insurance.
HMRC may send you a bill if you owe any Class 2 National Insurance contributions up to the date you have stopped self-employment. You should check the details on the bill and let HMRC know if it's wrong.
If you are registered for VAT, an employer or CIS contractor, or a CIS subcontractor you'll also need to tell HMRC separately that you've stopped trading.
You'll need to provide your:
Depending on your circumstances you'll also need your:
As well as telling HMRC you've stopped trading, you’ll also need to complete your tax return. Enter the date you stopped being self-employed in the self-employment section.
If a company or organisation that's liable for Corporation Tax is wound up it may still have to file Company Tax Returns and pay Corporation Tax during the closing or winding-up process.
Any capital gains made when your company sells or disposes of its business assets should be accounted for through its Company Tax Return.
You may have to show details of gains or losses you personally make on the disposal of your shares or interest in the company or organisation. To do this, fill in the Capital Gains Tax pages of your Self Assessment tax return.
You must let HMRC know as soon as possible if you stop trading. You must also submit a final Full Payment Submission (FPS) when running your final payroll. You need to pay any outstanding PAYE tax and National Insurance deductions within the deadlines.
If you sell your business, you have to follow regulations that set out your responsibilities to your employees. You can read more about these regulations on the GOV.UK website.
You will need to deregister from VAT. The links below explain:
Call HMRC's CIS Helpline as soon as possible if you stop trading as a subcontractor.
If you stop trading as a contractor and you’re registered under CIS you may need to:
You should call HMRC's CIS Helpline as soon as possible if your contractor business stops trading.
This list is not exhaustive and doesn’t cover all areas of HMRC's business. If the business area you are looking for is not mentioned above or you are in any doubt please contact HMRC.
There will be costs involved in closing down your business, such as the cost of administration, postage and telephone charges to notify everyone.
Many of these costs may be allowable expenses, which can be set against your tax bill.
Find out more about allowable expenses and reliefs for businesses that are liable for Corporation Tax by following the link below.
If you were self-employed and you've made a loss, you may be able to set this loss against your tax bill for the previous three years.
If your company or organisation has made a loss in its final accounting period, the company may be able to carry it back to set against its total profits over the previous three years.
Once you’ve cancelled your VAT registration, there are circumstances in which you can reclaim VAT paid on your purchases. The link below explains those circumstances and tells you what you can claim and how you can reclaim any VAT you’re owed.
If you’re self-employed and selling or disposing of business assets when you close your business, you may be liable to Capital Gains Tax on any gains you make. But, you may be able to claim reliefs (particularly Entrepreneurs' Relief) that may reduce or postpone the tax.
You should also bear in mind that, if your business is a limited company, you may be able to claim Income Tax relief if your shares have become worth next to nothing.
You don't have to deal with HMRC personally. An accountant or other adviser can act on your behalf.
HMRC expects all customers to pay their tax when its due. However they understand that as a result of circumstances outside your control, this isn't always possible - especially during the current economic climate.
Telling HMRC you have stopped trading or are selling your business will help you avoid getting unnecessary payment demands.
The following guidance explains what to do if you think you can't pay what you owe HMRC.
If you've received a bill from HMRC that you can't pay, it's important to contact them as soon as possible to try to come to an arrangement. They may give you extra time to pay possibly by instalments. If you don't, and your bill remains unpaid, HMRC will start proceedings to recover the money.
The following guidance sets out what you need to do and who to contact.