Transferring sole trader business to corporation

drb01

chrismac1 wrote: »

To do this properly:

1. Decide on a date for cessation as sole trader. A month end is good, 31 March 2013 will save you doing a tax return as you'll finish in 2012-13 tax year.

Is there any obligation (or advantage) to terminate the sole trading business? Presumably I could just submit zero accounts to HMRC and VAT?

chrismac1

There are various advantages:

1. You can then ask to leave self-assessment, these requests are being granted more than in the past due to - I think - the pressure from the child benefit joiners in the system.

2. A key tax advantage of the limited company is paying a low salary free of NI, then dividends. This is eroded if there are self-assessment earnings too.

3. It could be confusing to suppliers and customers to continue in both forms for what is essentially the same business. In turn, down the line this could enable a supplier to set aside the "corporate veil" and go after personal assets on the basis they thought the guy remained a sole trader.

chrismac1

Note in this context that the HMRC site states that limited company directors must file self-assessment returns. This is simply wrong, there is no such legal requirement. Indeed I have successfully written to HMRC to get several limited company directors taken out of self-assessment.

But if I were to list all the errors on the HMRC I know about, this thread would get stupidly long....