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Teresa Smith Bookkeeping Services logo

Bookkeeping with a personal touch

Changing from Sole Trader to Ltd Company

Is it easy to switch from one to the other?

The first step is to close down your self-employment with HMRC and you can simply do this on your final self-assessment tax return (SATR) and pay your final tax bill. By telling HMRC the date you ceased being a sole trader, this will close off your record with them.  The best time to cease trading would be at the end of your financial year.

If you are an employer, operating a pension scheme and perhaps CIS registered as a sub-contractor, these schemes will also need to be closed down along with VAT registration (after final VAT return submitted).  HMRC will require to be told, don’t assume they will know.

You should also tell all customers and suppliers there has been a

change in the legal entity as new contracts will need to be set up.  This will include insurance, phone, vehicle lease contracts etc.

Any assets of value on your Fixed Asset Register will be sold to the Limited Company.  Any assets with a zero net book value (NBV) will require to be valued at time of ceasing trading.  Any stock held by sole trader will also require to be valued and sold.

When you are happy all customer income and supplier payments have been made, along with any other payments, your bank account should be closed down and the funds belong to you, as the sole trader.  Remember, being a sole trader you ARE the business.

Limited Company

The new business will need to be registered with Companies House and bank account set up.

If you are continuing to be an employer, a new PAYE scheme, pension scheme and if still operating as a CIS sub-contractor, these will need to be set up too.  New VAT registration number applied for.

Staff that were employed under your sole trader business, will be transferred to Limited Company using TUPE agreements.  You, as the business owner, will be set up as a Director on the payroll.

Customer invoices should show new Limited Company details along with Companies House registration number, new VAT number and more importantly, new bank details.

Supplier invoices should be addressed to new Limited Company.

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Laundering Scheme.

Teresa Smith Bookkeeping
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