Closing a sole trade: deregistration, suspension and the tax people miss

Closure or temporary suspension?

Suspension keeps the trade registered for a temporary interruption under the Crafts Act; closure ends it. The end date cannot simply be backdated to erase a period in which the trade remained registered or operated. Choose the route before filing forms.

The final tax calculation

For an income-tax sole trader, business assets, receivables and liabilities left at cessation affect the final calculation under the statutory closing rules. Items retained privately do not become tax-neutral merely because no cash changes hands.

For VAT, keeping goods for which input VAT was deducted may be treated as a taxable supply. Capital goods and inventory can also trigger input-VAT adjustments. A qualifying transfer of an entire business unit to another taxable person follows different rules and may be preferable to piecemeal disposal.

What the closing file should contain

• the formal cessation or suspension record;
• final books, outstanding invoices and bank reconciliation;
• inventory and fixed-asset list with intended disposal or transfer;
• VAT and income-tax closing calculations;
• employee deregistrations and payroll records, if applicable;
• the required retention archive and access credentials.