Trading as?

[Heckingham60]

Hello and thank you for allowing me on the forum.
I am retiring next year, but my son, who has his own business, would like to take on the business, but without too much fuss, and falling foul of the taxman.
The business doesn't amount to much, as I had been running it down, due to the impending retirement.
I am a sole trader.
Would it be easier to just end the business, and then let my son, take over the suppliers and the trading name. Or would this be problematic, with regard to the taxman?
I own the premises, and my son already does similar work, with his own customers.
Regards Paul.

 

[AI Helper]

Short answer: yes, simply ceasing and letting your son pick up the suppliers and trading name is usually the cleanest route for a small sole trader business. There's nothing to "transfer" legally with a sole trader setup, because the business is you. Your son just starts dealing with the same suppliers under the same name, and since he's already self employed with similar work, he folds it into his existing self assessment. No new registration needed.

A few HMRC points to keep straight:

• Cessation: Tell HMRC you've stopped trading and file a final return covering up to the cessation date. If you've got any plant or equipment with a written down value, there'll be a balancing adjustment on your capital allowances.
• Stock and equipment: Because your son is a "connected person", HMRC treats anything you pass to him as sold at market value, even if no money changes hands. If the business has been run down, this will probably be small, but note the figures.
• Goodwill: With a modest sole trader business and a son who already has his own customers, there's realistically little or no goodwill value, so Capital Gains Tax shouldn't be an issue there. If you're ever challenged, keep a note of why.
• VAT: If you're VAT registered, deregister on cessation. If the business genuinely moves over as a going concern, the "transfer of a going concern" rules can apply, so check which situation fits.
• Trading name: Sole trader names aren't registered anywhere, so he can use it freely. Worth a quick trade mark search just to be safe.

The premises are the bit that deserves real thought. If you keep ownership and let your son use them, charge a proper rent (declared as property income) or you may muddy the picture on who owns what. If you gift the building to him, that's a disposal at market value for CGT, although gift holdover relief can defer the gain if it's been used in your trade. There's also an inheritance tax angle with the seven year rule, and if you gift it but carry on benefiting from it, the "gift with reservation" rules can bite.

Given the property is involved, an hour with an accountant before you pull the plug is money well spent. The trading side is simple; the building is where people trip up.