What if I stop trading or don't start?
Limited Company
Sole Trader

Closing your Limited Company

If you decide to close your business in the first financial year, you are still obliged to file a Corporation Tax Return and closing accounts. An accountant can handle this for you but will charge the full year accounting fee for the service of completing a set of accounts and a corporate tax return.
If your business was loss-making during the year and you have no tax liability to HMRC, some businesses choose to ignore their obligations to file since they have no tax to pay and only file form DS01 with Companies House. Whilst this is not recommended, it is anecdotally uncommon for HMRC to pursue a business for unfiled, loss-making first year accounts.

What if I don't start trading until a few months after incorporating?

Good news: you will have the option of filing dormant accounts and moving your accounting period forward by as many months as you were dormant.
You can file dormant accounts even if you have incurred some 'trivial' expenses such as website hosting, design fees, or consulting. However, from the date you buy inventory or fulfil your first dropshipped sale (termed 'buying goods with the intent to sell'), your business will be considered active.

Will I still pay the full annual accounting fee?

Depends on your accountant. Some will not file dormant accounts in this scenario and will instead file for the full year, and charge the full year fee accordingly.
With Ecommerce Accountants, if we file dormant accounts for you and move your accounting period forward, we credit back to you and accounting fees paid for the dormant period.
We do this to de-risk the decision to appoint an accountant early on, so that you are not on the hook for accounting fees if getting started takes longer than anticipated.

Closing down your Sole Trade

What you will need to do depends on the level of income you generated during the personal tax year (6th April to 5th April the following year).

Your Sole Trade made less than £1,000 in profit

If you have made less than £1,000 of trading profit during the tax year from your sole trade, then there is nothing further for you to do because this is less than your annual trading allowance.

Your Sole Trade made more £1,000 in profit

If you have made more than this figure, you will still need to file your self assessment with the sole trader pages filled out as well. If you find yourself in this position and need some help, get in touch.
Last modified 1yr ago
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