Closing or selling a business

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.

On this page:

How to tell HMRC and finalise your tax

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 self-employed

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.

Complete the online form

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.

Information you'll need to complete the online form

You'll need to provide your:

  • email address
  • name
  • date of birth
  • home or business address
  • daytime telephone number

Depending on your circumstances you'll also need your:

  • Ten-digit Unique Taxpayer Reference number if you have previously completed a Self Assessment return. You’ll find this on letters or forms sent by HMRC about your tax return
  • National Insurance number

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.

To send in your return log on to Self Assessment online

If you have shares or an interest in a company that is liable for Corporation Tax

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.

Selling or closing your company and Corporation Tax

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.

How report a capital gain

If you're an employer

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.

PAYE if your business closes or changes

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.

Selling your business - your responsibilities (Opens new window)

If you are VAT-registered

You will need to deregister from VAT. The links below explain:

  • what you need to do
  • what happens when your registration is cancelled
  • how to account for the VAT you owe on your final return
  • what you can claim back after deregistering - see the section below: ‘What you can claim for tax and National Insurance’

Changing your VAT registration details or deregistering from VAT

If you are a subcontractor under the Construction Industry Scheme (CIS)

Call HMRC's CIS Helpline as soon as possible if you stop trading as a subcontractor.

CIS Helpline
Reporting changes to a subcontractor business

If you are a contractor under the Construction Industry Scheme (CIS)

If you stop trading as a contractor and you’re registered under CIS you may need to:

  • complete the monthly CIS return for the month you stopped trading as a contractor
  • pay HMRC any CIS deductions you have made from subcontractors' payments
  • pay HMRC any PAYE that's been deducted from your employees' wages
  • complete a tax return to cover the part of the tax year when you stopped trading

You should call HMRC's CIS Helpline as soon as possible if your contractor business stops trading.

CIS Helpline
Contractor registration and obligations

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.

Contact HMRC

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What you can claim for tax and National Insurance

Cost of closing down

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.

Tax allowances and reliefs if you're self-employed

Tax allowances and reliefs - directors

Find out more about allowable expenses and reliefs for businesses that are liable for Corporation Tax by following the link below.

How to complete and file your Company Tax Return

Setting losses against your tax bill

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.

Accounting for losses if you're self employed - download help sheet 227 Losses (PDF 55K)

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.

No Corporation Tax to pay and refunds

Read more about Corporation Tax and losses when a company stops trading

Reclaiming VAT after you deregister

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.

Reclaiming VAT after you deregister

Handling capital gains issues

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.

Capital Gains Tax reliefs for business assets

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.

Download helpsheet 286 - Negligible value claims and Income Tax losses on disposals of shares you have subscribed for in qualifying trading companies (PDF 70K)

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Getting someone to act on your behalf

You don't have to deal with HMRC personally. An accountant or other adviser can act on your behalf.

Authorising an accountant to deal with HM Revenue & Customs for you

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What to do if you have problems paying HMRC

What to do if you can't pay

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.

Advice for businesses if you can't pay what you owe HMRC

What could happen if you don't pay HMRC what you owe?

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.

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More useful links

Contact us

Companies House website (Opens new window)

Gov.UK - Selling your business - your responsibilities (Opens new window)

Citizens Advice Bureau (Opens new window)

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