Sole trader to a limited company retrospectively??

Fiercehairdo

Can I retrospectively trade as a limited company? i.e. if I buy an already extant limited company that has been established, but dormant, for say 6 months can I claim my business has run through this company for that period in order to make a tax savings (rather than as a sole trader)? Is this legal? I have been advised that this is possible and not illegal. The idea is that I can get around my lateness in setting up as a limited company and claim that the previous 6 months invoices were part of the limited company. Please advise.

Pennywise

No, it's not legal.

You can't change history. At the time of each transaction, you weren't trading as a limited company - your customers & suppliers were dealing with you personally, not some unknown limited company - presumably you banked your sales income in a personal bank account because you didn't have a company bank account. Co House will have a record of the date you were appointed as a director (real time) and the date the existing shareholding was transferred to you. There's so much evidence to the contrary so you'd be an easy target for the tax inspector.

If you try it and get caught, you'd be looking at 100% fines based on deliberate and concealed tax evasion - if the figures are large enough, HMRC may also decide to go for fraud or tax evasion through the criminal court.

Just accept that you screwed up by not doing things in the right way, pay the tax and concentrate on optimising your position from today forwards.

chrismac1

Agreed. If the company were in existence and you had the shares and it was just some sort of admin. hitch - it happens - then it's possible. But to do it properly means reissuing all sales invoices in the name of the limited company, and informing all suppliers who had thought they were dealing with a sole trader. And if there were any objections to the backdating from any supplier or customer, my advice to the client would be to bite the bullet and not bother.

In this case, a dormant company means ziltch is happening. No receipts, no payments, nothing. I had one client who thought he had a dormant company and although it was not trading it had one HP agreement in the name of the company. He was not happy to hear this meant it could not possibly be dormant and there would be proper accounts filed and extra fees. Dormant = ziltch transactions.