There's no point in disguising the fact that 2020 has been a tough year for businesses and business owners.
Back in October, the Office for National Statistics (ONS) revealed that 64% of businesses across all industries were at risk of insolvency, with a further 43% of companies running on less than half a year's cash reserves.
Since then, the second and third lockdowns have been instated, plunging even more businesses into peril.
For many, this has meant having to make changes to businesses – whether it be in the form of shutting offices, changing partners or directors and, in some unfortunate circumstances, closing businesses altogether.
For some businesses, on the other hand, the pandemic may have had an opposite effect and they may even be upscaling and considering hiring new employees.
To help those business owners potentially affected, we've highlighted all the key things that need to be considered when making changes.
Changing personal details
A business owner must inform HMRC if they change their name, business name or personal or trading address.
They must also make sure that they've updated their details for taxes and schemes registered for, including:
- Corporation Tax
- Self Assessment
- PAYE for employers
- VAT (HMRC must be informed of changes within 30 days)
If an employer, business owners must also tell HMRC about changes to their business, including the correspondence address and payroll details.
If banking details are affected, HMRC must be given 14 days' notice.
Finally, Companies House will need to be informed about changes to Corporation Tax details before HMRC.
If self-employed or in a partnership, a person would be required to write to the address printed on the most recent correspondence with HMRC, or via calling up the Income Tax Helpline.
For Corporation Tax, contact would have to be made with the Corporation Tax Office. Recent tax forms or letters from HMRC should be checked for the address of the relevant tax office. Alternatively, the Corporation Tax helpline can be contacted.
With PAYE, the HMRC employer helpline can be contacted, or correspondence can be made with the National Insurance Contributions and Employers Office.
Legal structure changes
HMRC must be informed if a business owner chooses to change their business's legal structure – e.g. becoming a limited company or a partnership.
In addition to registering under a new structure, self-employed people must tell HMRC if they stop being self-employed or close a limited company.
To close a partnership, the nominated partner must report this on the financial partnership tax return.
Changes to a partnership
It is not necessary to inform HMRC that a partner is joining or leaving a business unless the partnership is VAT-registered.
It is worth noting that partners still have to send a Self Assessment tax return for the year they leave.
If a VAT-registered partnership, HMRC must be informed when a partner joins or leaves within 30 days. Failure to do so could result in financial penalties.
In the event that a partner dies or is made bankrupt, and the partnership has two or fewer partners, then the partnership will be automatically dissolved.
The remaining partner would then be required to re-register for Self Assessment as a sole trader.
Should there be more than two partners, the partnership will be dissolved unless an agreement is reached to do otherwise.
If the partner who dies or made bankrupt is the nominated partner, the partnership must subsequently nominate another partner and inform HMRC at the earliest opportunity. Failure to do so will lead to HMRC nominating a partner on their behalf.
That partner would be then be required to complete any outstanding partnership tax returns.
Becoming an employer
For those companies who are taking on employees or if someone is paying themself a wage via payroll, they must register as an employer.
Typically, registering as an employee needs to be done with HMRC when a company starts employing staff.
Registration must be done before the payday and it can take up to five working days to receive an employer PAYE reference number. Should a company become an employer, they cannot register more than two months before it starts paying people.
In the event that an employee or employees need to get paid before a company receives an employer PAYE reference number, a few things must be done.
❶ Run payroll
❷ Store the full payment submission (FPS)
❸ Send a late FPS to HMRC
Interested in finding out about how PayFit can help support you with your payroll admin? Why not book a demo with one of our product specialists?