Sole Trader Closes Business - What Happens to Assets?

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi everyone

Sorry if this seems like a stupid question and a bit long winded but here we go.

If a sole trader closes his business because of becoming employed due to CIS rule changes (going full time with one contractor instead of working for several), what are the TAX implications for his assets i.e. his car, which he will be keeping?

It was brought out of his drawings, no personal use so all expenses straight through P & L and no capital allowances claimed against it.

Sorry, I am having a total mind block today!!!!

Thanks in advance for any replies.

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Sole Trader Closes Business - What Happens to Assets?

    My thoughts are that the sole trader owns all these assets so is not taxed on them, he has already been taxed on the profits his business has earned and all items have been purchased from after tax profits.

    Annette
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Sole Trader Closes Business - What Happens to Assets?

    I would agree with Annette...

    You must make sure for certain that NO capital allowances have been claimed (have you seen the tax comps?) If there hasn't there will be no tax implications.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Sole Trader Closes Business - What Happens to Assets?

    Hi

    Thanks for both of your responses. It's my partners business so I know that no CA's have been claimed.

    Just out of interest, how would I have dealt with if any had?

    Many thanks
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Sole Trader Closes Business - What Happens to Assets?

    so long as proceeds are less than original cost, you would compare these with the TWDV of the assets. If proceeds are less, you have a balancing allowance, if more there is a balancing charge.

    Was ther car capitalised in the business? If aso you could generate a balancing allowance; suppose car was introduced via capital account at 10000 and then when trade ceases the market value has dropped to 5000 you would have an allowable deduction of 5000
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Sole Trader Closes Business - What Happens to Assets?

    One could ask the question, why were no CA ever claimed - it was a business asset and therefore entitled to them - so has paid more tax than is necessary...... wouldnt be happy it was me!

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Sole Trader Closes Business - What Happens to Assets?

    Hi

    Thanks very much for all your responses, they have helped a great deal.

    Regards

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