You can find plenty of information on how to register for Self Assessment, Corporation Tax, and VAT, but what if you need to deregister?
You might want to deregister for several reasons. Perhaps you’re moving into employment where your employer manages your taxes, or you might sell your company and not need to pay Corporation Tax anymore. Sometimes, your business might continue to trade but doesn’t need VAT registration any longer, for example.
We will guide you through the types of taxes that businesses pay and explain how you can deregister if necessary.
How do I deregister from tax as a sole trader?
If you are a sole trader looking to deregister from tax, it’s often because you no longer wish to be self-employed. This decision might arise from transitioning to employment or anticipating that you will earn less than the £1,000 trading allowance from self-employment in the following tax year.
Firstly, to deregister from tax as a sole trader, you need to inform HMRC. Contact them to explain that you believe you no longer need to submit a tax return. If they agree, they will send you a confirmation letter.
Secondly, ensure you have your National Insurance number and UTR number ready before contacting HMRC. You can reach them through an online form, their digital assistant, or by phone or post.
Finally, remember, if you’re deregistering because you anticipate earning £1,000 or less, you must inform HMRC by April 5th, the end of the tax year.
Submit your final Self Assessment
Before you leave self-employment, you must file one last tax return. This return should cover the period up until you stopped being self-employed, and as a sole trader, you need to complete it before the deadline. Make sure to include:
- Your final profit or loss figures.
- Your trading income.
- Any allowable expenses, including costs from closing your business, like postage fees for notifications.
- Whether you owe Capital Gains Tax on assets you’ve sold or disposed of.
- Any claims for Capital Allowances, including balancing charges from selling business equipment.
It’s a complex process with many calculations that must be accurate. If you have any doubts, consult your accountant!
How do I deregister from tax as a partnership?
If you need to deregister from tax as a partnership, the process mirrors that of a sole trader. However, the nominated partner must submit a final Self Assessment tax return for the partnership by the standard reporting deadline.
- For a VAT-registered partnership: Update the partnership’s details through the VAT account.
- For a non-VAT registered partnership: Inform HMRC of any changes in the partnership’s Self Assessment tax return.
How do I deregister from tax as a limited company?
If you want to deregister from tax as a limited company, remember that these companies are separate legal entities from their owners, which makes the process more complex. You will need to address the company’s obligations and also consider your own Self Assessment tax returns if you receive dividends, or deal with PAYE if the company pays you a salary.
Closing down your limited company
To close your limited company, start by applying to shut it down. The approach depends on whether your company is solvent, meaning it can pay its bills. If solvent, you have two options:
- Apply to strike off the company from the Companies Register.
- Initiate a member’s voluntary liquidation.
If your company is insolvent and can’t pay its bills, creditors’ interests legally take precedence over those of directors and shareholders. In this case, you typically need to:
- Prepare and submit the company’s final statutory accounts, indicating these are the final trading accounts before the company is struck off.
- File the final Company Tax Return.
- Pay any owed Corporation Tax and settle all outstanding tax liabilities.
Alternatively, if you’re not trading or conducting business but don’t want to completely close your company, you can make it dormant.
Deregistering for Self Assessment after you close your limited company
If you close your limited company and still receive income from other sources, you might not need to stop submitting Self Assessment tax returns. Amidst handling your company’s closure, remember to consider the implications for your personal tax.
If you think you no longer need to file a tax return, contact HMRC. This process is the same as for sole traders and partnerships – HMRC will reach out to confirm whether or not you need to continue submitting tax returns.
Deregister for PAYE if you stop being an employer
If you need to deregister from PAYE because you’re no longer an employer, perhaps because your only employee has left or you’re closing your company and won’t draw a director’s salary anymore, take these steps:
- Inform HMRC that you have stopped employing people.
- Make a final PAYE submission, which could be either a Full Payment Submission (FPS) or an Employment Payment Summary (EPS).
Should you employ someone again in the next tax year, you can reactivate your PAYE scheme by sending an FPS using your PAYE reference. If there are any months when you don’t pay staff, submit an EPS to notify HMRC.
What if I’m VAT-registered?
If your VAT-registered business closes, you must deregister from VAT promptly. You can cancel your VAT registration online. In certain situations, like making your business dormant, you have 30 days to deregister.
You can also deregister for VAT if your business continues to trade but either consistently has a turnover below the £83,000 deregistration threshold or the nature of your business changes and you no longer make VAT-taxable sales.
Need more help in deregistering from your taxes? Reach out to our experts at Count for all the information and guidance you need!