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Sole Trader - Capital Allowances on ceasing

I registered as self employed to run a small photography business and have claimed annual investment allowance in the last two years for equipment purchases totalling around 7k.

What is the situation with this when I cease trade? I believe that if I sell the equipment then any sale proceeds will count as trading profit on my SA and therefore essentially what's happened is I've received tax relief on the depreciation, is that correct?

What if I keep any of the equipment, how do I treat that for SA purposes? Do I act as if I'd received market value for the assets, thus creating the same situation as if I'd sold them to another party?

Also do I need to tell HMRC as soon as I cease to trade, or at the next SA submission?

Many thanks

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By BKD
23rd Jan 2013 16:12

Pretty much correct

If you stop using the assets for your business without selling them you should account for a notional sale at their market value. This will create a balancing charge in the capital allowances pool which will be added to your trading profit/deducted from trading loss.

You can wait until you submit your tax return, and note the cessation date on there. But if you've ceased self-employment altogether you should let HMRC know immediately that you're no longer liable to pay Class 2 NI.

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23rd Jan 2013 16:16

Thanks!
Thank you so much. I'm considering keeping the camera. There is no pool as I claimed 100% AIA on all purchases. So presumably if I keep the camera I just treat the notional market value as trading profit in the tax year, yes?

What do you use to determine the MV? eBay or similar?

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By BKD
23rd Jan 2013 16:36

You do have a pool

It just so happens that the balance at the moment is £nil. But it's all semantics - the "proceeds" will end up as trading profit.

If you can find comparable sales of equipment on eBay I'd say that's as good a place as any. If you've any local photography shops you could always ask them how much they'd pay you for the kit. There is also the likes of ffordes near Inverness - they take S/H equipment so you could email them and ask for a quote.

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23rd Jan 2013 16:41

Ok great, thanks. That's been really helpful!

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28th Jan 2013 11:32

and what about the VAT

You might also have claimed back the VAT, so do not forget to re-pay that.

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28th Jan 2013 12:21

VAT on deregistration

mwangishah wrote:

You might also have claimed back the VAT, so do not forget to re-pay that.

That all depends on the total value of the business assets at cessation. If they are less than £6000 including VAT there is no VAT payable.
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By ringi
29th Jan 2013 14:13

a few wedding a year ...

Could you not do the photos for a few weddings a year and therefore not cease trading.   Class 2 NI would be an issue, but I understand if you earn less than £5,595 per year you can apply for a Certificate of Small Earnings Exception and not pay Class 2 National Insurance contributions.

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