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OT winding up a business



happypig

happypig

Staring at the rude boys
May 23, 2009
7,956
Eastbourne
Can anyone advise ?
My wife has a small business which I think is called a "Lifestyle Business" in that she already has a job but she makes and sells stuff. She was turning over about 4-5k a year and paying tax as required on it. She's now decided that due to caring responsibilities and leisure changes, she wants to wind it up.
Question is, the business still currently owns a few grand of stuff, does she have to pay tax to dispose of it so the business is asset-free or can she just appropriate it and tell the Inland Revenue that it's no longer trading ?
 






happypig

happypig

Staring at the rude boys
May 23, 2009
7,956
Eastbourne
Justice said:
Is it a Ltd company? And why we're you paying tax on such a small amount?
Click to expand...

Not a limited company. All her allowance is taken up with her normal job and so she was liable for tax on her second income.
 


W

warmleyseagull

Well-known member
Apr 17, 2011
4,210
Beaminster, Dorset
Sounds as if the 'stuff' is actually usable. In this case the strictly correct treatment is for the business to sell the stuff at cost to your wife. Assuming she has been valuing stock at cost when preparing her accounts, this will give rise to no profit and therefore no tax. There may be a justifiable case for valuing some stock at lower than cost because it is damaged or obsolete, in which case there will be terminal loss relief.

Be aware of the risks of getting the timing wrong when ceasing a trade in this way, as effectively some profits may be taxed twice. This is complicated and I would advise either some detailed research yourselves or use an accountant to guide you through. If profits have been modest, perhaps not worth worrying about too much but if profit are in four figures then it is.
 


happypig

happypig

Staring at the rude boys
May 23, 2009
7,956
Eastbourne
warmleyseagull said:
Sounds as if the 'stuff' is actually usable. In this case the strictly correct treatment is for the business to sell the stuff at cost to your wife. Assuming she has been valuing stock at cost when preparing her accounts, this will give rise to no profit and therefore no tax. There may be a justifiable case for valuing some stock at lower than cost because it is damaged or obsolete, in which case there will be terminal loss relief.

Be aware of the risks of getting the timing wrong when ceasing a trade in this way, as effectively some profits may be taxed twice. This is complicated and I would advise either some detailed research yourselves or use an accountant to guide you through. If profits have been modest, perhaps not worth worrying about too much but if profit are in four figures then it is.
Click to expand...

14/15 profit was about £600. 15/16 was less....
I don't think it's worth engaging an accountant at those sort of levels
 






K

kingcole

Well-known member
Jan 2, 2010
5,315
So far down Shoreham Beach, I am virtually back in
warmleyseagull said:
Sounds as if the 'stuff' is actually usable. In this case the strictly correct treatment is for the business to sell the stuff at cost to your wife. Assuming she has been valuing stock at cost when preparing her accounts, this will give rise to no profit and therefore no tax. There may be a justifiable case for valuing some stock at lower than cost because it is damaged or obsolete, in which case there will be terminal loss relief.

Be aware of the risks of getting the timing wrong when ceasing a trade in this way, as effectively some profits may be taxed twice. This is complicated and I would advise either some detailed research yourselves or use an accountant to guide you through. If profits have been modest, perhaps not worth worrying about too much but if profit are in four figures then it is.
Click to expand...


That's odd advice. If it's not a limited company she is clearly a sole trader so she can't sell iher stuff to herself as she already owns it.

Decide the date she finishes trading and note on the next tax return that this sole trading business is no longer trading. You will be asked for the final date of trading and profits for that period and be asked to pay tax in the usual way.

If she still has stock and intends to sell it, then she hasn't really stopped trading. If she's not selling it, then she has stopped trading and the previous advice should be OK.

I guess the correct answer is speak to an accountant but this is quite simple. The HMRC self assessment helping should be able to help with the tax return.

She just needs to make up her mind as to when she has stopped trading
 


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