Fool-proof guide to closing a self-employed business

Closing a self-employed business? You may think it’s as easy as shutting down your PC and never logging back in, but actually, there’s a bit more to it than that. Because, well…tax.

If you want to know all about the tax implications of closing your self-employed business, read below!

What’s the first step of closing a self-employed business?

Well technically the first step is actually deciding to close your self-employed business, but anyway.👇

First things first, you need to let HMRC know what you’re doing as soon as you’ve come to the decision. You can do this online by filling out this form. Or you can call HMRC via telephone to tell them.

Once you let HMRC know, they’ll de-register you from self-employment by deactivating your UTR number so you won’t be expected to complete a tax return the following year. If you change your mind in the future, you’ll have to get HMRC to reinstate your UTR number.

If you’re registered for VAT, you should also ask HMRC to cancel this registration for you, too.

Then what comes next?

Now you’ve informed HMRC, they’ll know not to expect a tax return the following year, but that doesn’t mean you’ve escaped filing a tax return for the current tax year. 😅 You’ll still have to report your earnings for the year you closed your business.

For example:

If you stop trading on the 13th February 2023, you’ll still have to submit a Self Assessment for the 2023-24 tax year. But then you won’t have to file a tax return for the tax year 2024-25 (unless you have another reason to do one).

⚠️ Bear in mind, your final tax return will still need to be submitted before the deadline or you may face a late fee. ⚠️

What should I include in my final tax return?

When sending your final tax return, you should ask yourself all of the following:

Can I claim any allowable expenses?

If you spend any money closing down your business, you may be able to claim a tax relief for these costs to reduce your tax bill.

Here are a few examples of what can be classed as an allowable expense when closing a self-employed business:

Do I owe capital gains tax?

Capital gains tax (CGT) is the tax you pay when you sell an asset for profit. So, if you’ve sold any business equipment or machinery and made a gain (this is the difference between what you paid for your asset and what you sold it for), you’ll have to pay capital gains tax.

However, you may be able to claim the business asset disposal relief on your final tax bill. This means you’ll pay a flat rate of 10% capital gains tax when selling or getting rid of any valuable items that you’ve used for your business.

Find out more about this here.

What about my employee(s)?

If you’ve employed anyone in your business, they’ll probably (definitely) appreciate you letting them know as soon as possible that they’ll no longer be working with you soon.

(So that’s step one. 😅)

You’ll then need to close your PAYE scheme. You can do this by submitting a final payroll return with HMRC. You can fill in either of these forms:

How did Shakira react?

Often, when celebrities are caught in a tax evasion scheme, an interview or public statement follows. They may say something along the lines of ‘I only acted on tax advice I was given. It was a mistake.’ Sometimes a hefty fine is paid and the whole thing goes away…

But not this time. 🙅

Representatives for Shakira argued that she’s already repaid the 14.5 million euros the authorities were claiming and that the star ‘has no tax debts with the Spanish Treasury.’

She also maintains that she was not living in Spain at the time. She argued that she was too busy fulfilling business commitments around the world instead.

Safe to say Susana wasn’t invited to the world tour. 🤷

What was the result of this feud?

You’d think Shakira and the Spanish tax agency would have reached some sort of agreement by now considering it all kicked off in 2018, right?

In 2019, football star Cristiano Ronaldo paid almost 20 million euros to settle his tax fraud ordeal in Spain.

But in this case, both sides refuse to back down. In fact, a representative for the singer confirmed that Shakira has rejected an offer to settle the case, and will fight in court instead.

Currently, prosecutors seek an eight-year sentence and 20 million euros in damages if the star is found guilty. 😳

And, there’s more…

After practically having her entire personal life dissected by investigators, it came as no surprise when Shakira launched an attack on the Spanish tax agency. She stated the authorities had made her a victim of their ‘smear campaign’:

We’re not so sure we’d be very comfortable with our zumba appointments being spied on either, to be honest…

See more on : Fool