Outstanding Tax Balance before switch to Limited Company

SkewE2

Hi all

At the minute I'm trading as a sole trader. I'm a little behind with my tax, but I've a direct debit in place with HMRC to get me back on track.

The money coming into the business is going to rise sharply. It means I will be looking to switch from a Sole Trader to a Limited company.

Obviously I will cease as a Sole Trader at this point, but can I do this with outstanding tax? So, could I get in touch with them, explain I am no longer a Sole Trader, but now part of a Limited Company and continue to make my monthly payments to them to clear the amount that is still owed. At the current rate, this will take about another 8 months given that I will need to file for 2019-20 as the company runs April to April.

I guess I'd be paying this as someone who's now employed albeit Director of the company moving forward. I just wasn't if that when I stopped as a Sole Trader that the account would need immediate settlement. Ideally, the increaase in money would be a lump sum to just wipe it all off in one, but it's more an increase in hourly, for example, from £10 up to £20 per hour. Payments will increase though as a result to more money coming in.

I hope that makes sense and thanks in advance for any help.

BoGoF

To answer your question, a change to Ltd company will not result in you needing to settle what you owe immediately.

However I hope you have an accountant as you really dont seem to have a clue.....certainly not enough to be preparing Ltd company accounts.

SkewE2

Wow. Thanks. I think?

Bit rude, but these keyboards will be bashed.

BoGoF

Rude - maybe.

Honest - definitely.

If you had an an accountant surely you would be asking them.

Pennywise

If you dont have an accountant do you know the various elections/reliefs you may need to claim to avoid a big tax bill on the conversion? Without claiming these, you have to effectively sell the business and all its stock and other assets at market value (inc goodwill) which would usually mean a big personal tax bill. Conversion from st to ltd isn't for the do-it-yourself amateur.

TheCyclingProgrammer

Definitely get an accountant.

Your affairs are separate from your company affairs. Your arrangement with HMRC to pay of the debts you owe personally will continue.

In the meantime you will probably need to continue submitting a tax return if you continue to earn taxable income from your business (eg dividends).

polymaff

Most common mistake that is made by people in your position. Not realising that you and the company are individual entities - particularly in the eyes of HMRC. Render unto Caesar that which is Caesar's - the pair of you.


Also, the most common abuse of English nowadays: Obviously...:)

SkewE2

Thanks for all the replies.

I do have an accountant, it's just it was late on a Friday and I knew that I'd have to wait to until Monday before I could get an answer and thought that someone on here might already know. We've spoken about the switch previously but waited until the time was right and not spoken about this exact topic.

It'll be a big change going from ST to Ltd, but it's exciting at the same time, given that it's because the business is growing.

Polymaff - this is a really good point and will be strange given that everything has been "me" for so long.