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What is the position when I cease trading?

Question:
I registered as self-employed to run a small business and have claimed annual investment allowance in the last two years for equipment purchased at around £8,000. What is the situation with this when I cease trading as I believe that if I sell the equipment then any sale proceeds will count as trading profit on my SA and therefore essentially what's happened is I've received tax relief on the depreciation, is that correct?  What if I keep any of the equipment, how do I treat that for SA purposes? Do I act as if I'd received market value for the assets, thus creating the same situation as if I'd sold them to another party? Also do I need to tell HMRC as soon as I cease to trade, or at the next SA submission?

Arthur Weller replies:
What you have written about selling your equipment is essentially correct - it is called a balancing charge, and is treated in a similar way to trading profit. If you decide to keep the equipment yourself, you are correct that you act as if you had received market value for the assets - see hmrc.gov.uk/manuals/camanual/CA23250.htm.  In respect of informing HMRC about the cessation, as far as income tax is concerned, it can wait until the next SA submission. But it may be worth your while ringing the HMRC helpline 0845 915 4655 to tell them you have ceased trading, so that demands for Class 2 NIC will stop.

I registered as self-employed to run a small business and have claimed annual investment allowance in the last two years for equipment purchased at around £8,000. What is the situation with this when I cease trading as I believe that if
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This question was first printed in Business Tax Insider in June 2013.