Ceasing To Trade

My business has been badly affected by the recession and I have taken the decision to enter early retirement and close down. I am going to keep most of the stock left over, plus a number of tools and equipment which I used for the business. Will I have to pay over any VAT on these items?

1st October 2009

When you cease trading, it is important to remember to notify Her Majesty's Revenue and Customs within 30 days of the final day of trade. Once they receive this notification, they will send out a final VAT return for you to complete.

When you cease trading, VAT must be accounted for on stock and certain assets at the close of business on the day your VAT registration is cancelled. You must pay VAT if the market value of standard rated items exceeds 7,666 and this is accounted for on your final VAT return.

The standard rate of VAT reverts back to 17.5% in January 2010, at which point the above threshold will reduce to 6,714.28, which is equivalent to 1,000 in output VAT.  If the items are valued below this figure, then you will not have to pay over any VAT.

It would be prudent to keep a list of the stock held at the close of business, with a note of the estimated value of  any equipment in case there are any queries by HM Revenue & Customs at a later date. If you can obtain a written valuation from the supplier this would be ideal, otherwise you could use advertisements for similar second hand goods as a basis of arriving at an estimated value.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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