Changing from Sole Trader to Ltd Changing from Sole Trader to Ltd
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  1. #1

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    Default Changing from Sole Trader to Ltd

    Hi All,

    I was hoping someone could offer some advise. If so it would be appreciated.

    I am currently working as a sole trader and have set up a new limited company.
    I am still owed one final payment from a client for work completed, which is due at the end of this month. I was wondering, when can I tell HMRC that I am no longer trading through my sole trader business? My work has dried up through that company anyway now and I have a new contract through an agency for ongoing work with a big construction company. This starts next week.
    Do I need to wait until I recieve the final outstanding payment from my client at the end of the month, then tell HMRC I have ceased trading and I can also close down my business bank account?
    I already have a new accountant and will be setting up a brand new business bank account through them.

    I hope that was clear enough. Any help would be appreciated )

    cheers,
    Tony

  2. #2

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    vetran's Avatar
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    what does your accountant say?

    Does HMRC have any guidance online?

    Alternatively ask a number of anonymous internet users.
    "If you didn't do anything that wasn't good for you it would be a very dull life. What are you gonna do? Everything that is pleasant in life is dangerous."

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  3. #3

    More time posting than coding


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    Quote Originally Posted by spin View Post
    Hi All,

    I was hoping someone could offer some advise. If so it would be appreciated.

    I am currently working as a sole trader and have set up a new limited company.
    I am still owed one final payment from a client for work completed, which is due at the end of this month. I was wondering, when can I tell HMRC that I am no longer trading through my sole trader business? My work has dried up through that company anyway now and I have a new contract through an agency for ongoing work with a big construction company. This starts next week.
    Do I need to wait until I recieve the final outstanding payment from my client at the end of the month, then tell HMRC I have ceased trading and I can also close down my business bank account?
    I already have a new accountant and will be setting up a brand new business bank account through them.

    I hope that was clear enough. Any help would be appreciated )

    cheers,
    Tony
    I am not an accountant but I think it will be the end of the tax year. You will need to fill in your tax return and include your income from your LTD co as well as a separate part for your sole trader. If you are vat registered gas a sole trader you can probably apply to be deregistered at the end of period when you receive your last payment.

    Again, I am not an accountant, so probably best to check this with your accountant

  4. #4

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    You can run both businesses in parallel and pay differing tax structures on the individual contracts but as everyone says... talk to an accountant.

    I'm a professional software developer, I can fix a motorbike but please don't ask me to fix yours.

  5. #5

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    Thanks for the advice.
    I don't know if you meant it that way but your comment came accross a bit snarky veteran. Do your eyes light up when you see people asking sensible questions on here so you can act all high and mighty?

    I looked on HMRC website but it just directs you to a form that says to inform them that you are no longer self employed. I am still self employed but through a new ltd company.
    I asked my accountant, one that was recommended on this forum in fact. And she said she wasn't sure.

    So I guess I just give my accountant my accounts for the sole trader part of this year and she can include it in my next tax return and put a trading end date on it.

    It's not so crazy to ask some strangers on a contracting forum for any advice they may be able to offer is it?

  6. #6

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    Be a little careful about terminology. If you are working through your limited company you are not self-employed, nor are you an employee, you are director, legally speaking an officer of the company. As such you are in a different style of accounting for company and personal income compared to a proper Self-Employed worker. Keep the two separate.

    As has been said you can run the two in parallel, providing you keep the accounting straight for each, and do the final changeover at tax year end in April 19.

    As for snarky, yes, it's not always intentional, but too many people start from the assumption that everyone knows everything. It sometimes colours their responses...but then again, this is the internet....
    Blog? What blog...?

  7. #7

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    Quote Originally Posted by malvolio View Post
    Be a little careful about terminology. If you are working through your limited company you are not self-employed, nor are you an employee, you are director, legally speaking an officer of the company. As such you are in a different style of accounting for company and personal income compared to a proper Self-Employed worker. Keep the two separate.

    As has been said you can run the two in parallel, providing you keep the accounting straight for each, and do the final changeover at tax year end in April 19.

    As for snarky, yes, it's not always intentional, but too many people start from the assumption that everyone knows everything. It sometimes colours their responses...but then again, this is the internet....
    Thanks mate. I'm starting to think that is the case. My accountant mentioned for this year to give her info about my Sole Trader accounts and she will take it into account when she does my accounts at the end of this year for my new ltd co. I was just unsure if I needed to inform HMRC about it and that's what she said she didn't know about.

    I think I just file my accounts at the end of the tax year, fill out the relevant details for the sole trader and ltd accounts. I guess I put a ceased trading date or something for my Sole Trader as the day I started on my new ltd contract. Or just stop filing anymore accounts for the Sole Trader going forwards. All the Sole Trader account was anyway is a self assessment at the end of the year and I wasn't VAT registered then but now I am on flat rate VAT. My PAYE, nat ins etc the accountants will sort out going forwards.

    Hopefully it comes out in the wash. I'll mention it to my accountant again. Maybe I didn't explain it very well or caught her at a bad time last time as I was also sorting out other things with her at the time like new bank accounts etc.

    Appreciate it mate. I was also thinking. If I couldn't find the info anywhere then there are probably other people out there unsure about it. If I find out I'll update this thread. I'll make sure I also put everyone else down for being so stupid and not knowing what I know

    cheers

  8. #8

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    Quote Originally Posted by TwoWolves View Post
    You can run both businesses in parallel and pay differing tax structures on the individual contracts but as everyone says... talk to an accountant.

    I'm a professional software developer, I can fix a motorbike but please don't ask me to fix yours.
    WHS

    You can run a business as sole trader or as LTD. You can also run both at the same time. Sole trader will be part of your Self Assessment, while LTD will need it's own accountants with salary or dividends put on your Self Assessment.

    I regularly run a combination of PAYE part of the year, Sole Trader for Retail and LTD for Contracting depending on whether I'm perm or contract, self employed with a business or not. There are some fantastic tax saving opportunities if you know what you're doing.
    What happens in General, stays in General.
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