Annual Accounts Cessation
Cessation of accounts is a process that involves closing out all accounts and financial records of a business.
This is usually done when a business is winding down and no longer operating.
It’s important to understand the steps involved in cessation of accounts, as this can help you avoid any financial or legal issues in the future. Read on to learn more!
What are cessation accounts?
Cessation accounts are a set of financial documents that are produced when a business is no longer operating; or in the process of winding down.
These accounts are used to record the final transactions of the business and to close off all outstanding liabilities and assets.
The production of these accounts is important to ensure the accurate accounting of the business’s final financial position.
Cessation accounts can also be used to provide a historical record of the company’s activities and its financial position over time. These accounts are also used to calculate the final tax liability of the business.
What happens after cessation of trading?
After the cessation of trading, all accounts within the company must be closed and reconciled.
This includes accounts receivable, accounts payable and any other accounts that may have been opened throughout the business’s lifetime.
All unpaid invoices must be settled and all payments received must be recorded and cleared.
All customer accounts must also be closed and any unclaimed payments must be returned to their rightful owners.
Finally, any assets held by the company should be sold or liquidated and any outstanding debts must be collected.
Upon completion of these steps, the company’s financial statement should reflect the true end-of-business situation. This is important to ensure that the company’s creditors and other interested parties are not adversely affected by the business ceasing.
Who you must tell
Fill in an application to strike off and send a copy within 7 days to anyone who could be affected. This includes:
- members (usually the shareholders)
- managers or trustees of any employee pension fund
- any directors who did not sign the application form
After your company has closed down it can not carry out any trades or further transactions. If at this point, the company still has assets, they will be transferred over to the crown.
When dissolving a company, you must fill out a DS01 form. Before you complete this form it is important that your transfer all of the company’s remaining assets to its shareholders. This will avoid them from becoming the property of the crown.
After your business has closed down, you will need to keep records and financial transactions for at least 7 years.
If your business has employed people you will need to keep copies of your employers’ liability insurance policy and schedule.
PAYE and National Insurance (NI)
You’ll need to tell HMRC that your company has stopped employing people.
This is usually done by submitting a final EPS/FPS using your payroll software.
The software will ask for a date of cessation and various information that you will need to fill in before filing your last submission.
Once this has been completed, you will need to produce documents that will then be distrbuted to your employees such as a final payslip and P45.
Again, if you have third-party software to help you with the process, it will likely provide instructions for you to follow.
It is important to make sure this process is done correctly so HMRC understand that these employees are no longer employed by your company. Otherwise, they may receive incorrect tax bills and tax codes.
Reasons for Account Cessation
There are a number of reasons why a business may initiate the process of cessation. This can include ill heath of the directors, failure to return a profit, ore one of several other reasons.
Depending on the reason for ceasing trading you may have to follow a different route to closing your company down that dissolution.
What is included in a set of cessation accounts?
A set of cessation accounts that is prepared when a business ceases operation is comprised of a collection of financial statements and reports that show how the business was performing.
This includes a statement of financial position, profit and loss statement, cash flow statement, changes in equity and other related documents.
The set of cessation accounts provides an overview of the company’s financial status at the time of closure.