Quitting as an independent professional: what should you pay attention to?
Being self-employed offers freedom, but there may be situations in which you decide, or are forced, to stop. Whether you are switching to salaried employment, retiring, or have another reason, it is important that you arrange this properly.
Practical steps for quitting
Do you want to quit as a self-employed professional? Then start by deregistering your business with the Chamber of Commerce. Send in a form, together with a copy of your ID.
Next, deregister with the Tax and Customs Administration by means of a written statement (from yourself, the Chamber of Commerce or a trustee).
Also consider other things you need to cancel, such as:
- memberships of trade associations;
- trade journals;
- business insurance;
- subscriptions and web hosting;
- business parking or work permits.
Please note: you must keep your records for at least 7 years.
Don't forget to inform your suppliers, bank and any other stakeholders of your decision.
Entitled to benefits?
As a self-employed person, you are not generally entitled to unemployment benefits. However, there are a few schemes that you may be able to take advantage of:
IOAZ scheme
The IOAZ scheme is intended for self-employed persons who are forced to stop working and:
- are over 50 years of age;
- are partially incapacitated for work;
- have worked for the past 10 years (including 3 years as an entrepreneur);
- have an income below the specified income threshold.
BBZ scheme
The BBZ scheme offers temporary financial support in the form of an interest-free loan if you:
- have run your business for at least 1.5 years;
- have to stop due to structurally low income;
- are between 18 and 65 years old;
- still have debts to pay off.
State Pension (AOW)
After the age of 66, you will receive a basic pension through the AOW. As a self-employed person, you do not accrue a supplementary employee pension, unless you have made provisions for this yourself, such as an annuity or pension investments.
An extra tip: in your last year as an entrepreneur, you can still make use of the Fiscal Old Age Reserve (FOR). This allows you to defer taxation on part of your profits. Seek good advice on this: the FOR has both advantages and disadvantages.
Taxes & administration
When you close your business, you will have to settle your accounts with the tax authorities. This includes:
- outstanding income and sales tax;
- the value of your business assets and stock.
Business assets that you do not sell will become your private property. From a tax perspective, this transfer is considered a supply and you will have to pay VAT on it, based on the current market value.
Cessation profit and deduction
Cessation profit is the profit you make when you close your business (such as hidden reserves and goodwill). You pay tax on this.
You may be entitled to a cessation deduction. In 2024, this will be a maximum of £3,630 and the following applies:
- the deduction is never higher than the termination profit;
- you may only use this scheme once in your lifetime.
Transferring or converting a business to a private limited company
In some cases, you can transfer the business quietly, for example within the family or when converting to a private limited company. Please note: this has tax consequences. Seek good advice on the best approach.