Stopping & Starting self employment

JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
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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