Disincorporation

Disincorporation

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What do I need to consider, what steps are needed for her to trade as a sole trader? There are no assets except the goodwill.
Deborah Griffin

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
29th Nov 2005 00:03

Don't forget the VAT
Here are your key points for disincorporation
1. Register for Class 2 NIC and make sure you file CWF1 within three months of the end of the month of starting to trade.
2. Re-register for VAT if appropriate (limit is now £60,000) but remember that if TOGC provisions apply (which on the face of it is likely / certain) the sole trader will be treated as having the turnover of the Ltd co. that is, if Ltd co is over the limit, sole trader must register for VAT from day 1 not after £60,000 is reached. I wouldn't recommend transferring the VAT number as this transfers any company liabilities for output tax to the sole trader. However, simplicity might suggest that this would be a good bet, but do consider the issue of a mistake a while ago which comes back to haunt you.
3. Probably most important - get a bank account that is not in the name of the company. Otherwise at best you risk confusion, at worst a claim that the company is still trading.
4. You have indicated no assets except goodwill, but for the sake of completeness for a general query, also consider capital allowances on plant and machinery. You can do a (joint) election for tax written down value to apply for CA purposes, but this will leave you with nil allowances in the last period of the company. But you might be getting 22% or 40% relief in the sole trader rather than 19% in the company so not a problem.
I think that's all!
Rebecca

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By martinfoley07
25th Nov 2005 17:30

on face of facts you've given us,
company is selling goodwill to a sole trader.

So CGT on company for full gain at marginal CT rates, no BATR, no annual exemption.

So it's question of what is the value of the Goodwill. If you can successfully argue it is nil, company has made a capital loss (but sounds as if no CT on DI profits against which to offset since formation?)

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