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Stopping and re-starting Self Employment

Stopping and re-starting Self Employment

Client's accounts (gardener business with 2 employees) have always been prepared to December, and he has overlap profits of £800.

on 31/12/2011 he moved 200 miles accross the country. he sold his business to one of the employees for £10k but this payment was only for his trading name and customer list, he sold one vehicle to an unrelated 3rd party and kept the other vehicle himself.

In Jan, Feb & Mar 2012 he was claiming JSA whilst looking for employment, and then in April 2012 he gave up looking for employment and started doing some small gardening jobs on a self employed basis.

I don't think that he ever told HMRC that he ceased and re-started self employment.

SO... Do I:

(a) Treat the 2 self employments as separate self employments - draw up accounts to 31/12/2011 which will be to the cessasion of the business, put in a market value of the vehicle he retained to calculate balancing allowance/charge and claim relief for the overlap profits, and then from 2012/13 just treat his small gardening jobs as a new business, or

(b) As both self employments are basically the same trade using the same vehicle should I treat it as a continuous self employment, not claim overlap relief and continue preparing accounts to December each year?

I phoned HMRC and they said it was up to me which way I do it, but I'm worried that there may be reasons why either way would viewed as wrong in the event of an enquiry.

Does anyone know which way is correct or is it really up to me (& the client) to pick one? 


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By pjones
25th Jan 2013 12:15


My view would be a cessation with appropriate adjustments (BA/BC and overlap profits relieved) with opening year rules then applied to new sole trade.  This is on the basis that name, customers etc all been sold (second employee also presumably no longer an employee) and therefore all signs indicate a cessation.

On another point, I am no expert in this area however if you showed the sole trade as continuing, would this cause any issues with the JSA claim?

Thanks (1)
25th Jan 2013 12:47

I'm the other way

I'm seeing the same trade.  Employees buy out old branch on the move and new branch commences after the move following a very short break.  It's touch and go though. I think HMRC might agree with PJones.

See BIM70530, BIM70580.and BIM70605.

Thanks (1)
25th Jan 2013 13:09

Thank you very much both of you.  I think the line in BIM70605 saying 'The most relevant factor will usually be the extent to which the customer base of the trade changes' is perhaps the key factor here - I can safely say he's not going to be travelling 200 miles to mow a previous customer's lawn - he will have a completely new customer base and therefore I'm going to go with (a).  The only thnk I'm a bit concerned about is that HMRC will see a cessation date of 31/12/2011 on the 2011/12 tax return and then not issue a 2012/13 tax return which may/WILL confuse the client, but I shall include a note in the white space on the TR and in the letter to the client regarding this and hopefully it will all work out alright.

Thanks again, this has been worrying me for days now!  

PS: I don't think that the JSA is an issue, I've encountered similar instances before without any issues.

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