In this series, we have looked at some of the issues that might arise and matters you might need to address when selling or winding up your practice and, in the previous article, at ongoing obligations after you retire such as insurance and record-keeping. But arranging and paying for insurances is not the only ongoing financial matter you may need to address after ceasing to practise; a number of tax and accounting issues may arise as well.
What, if anything, you need to do will depend on whether you carried on your practice as a sole trader or through a partnership or company, and whether you have wound up your practice or sold it. You will need to think as well about the impact that ceasing to practise will have on your liabilities and obligations in respect of income tax, payroll tax and VAT, to name just some of the more obvious considerations.
If you are selling your business or retiring from a partnership that others are continuing, you may be able to rely on the purchaser or the remaining partners to deal with some of these issues. But if you are winding up your practice you will be responsible for these yourself, and will have to consider whether you need to file final returns and de-register for VAT payment. Remember that if you are selling your business, you are likely to have to indemnify the purchaser against unpaid tax relating to the period during which you owned the business.
As with many of the issues that arise when ceasing to practise, it may be worth seeking expert advice to ensure that everything is done properly, as some aspects can prove complex. Your solicitors or accountants should be able to assist. You also need to consider what you need to do with invoices that are unpaid at the date you cease practising. Again, this may depend on whether you are selling your business, retiring from a partnership that others are continuing, or winding up your practice.
In the former case, the purchaser or remaining partners will probably pursue outstanding invoices, although there may be an adjustment to the purchase price or your final payment from the partnership if any of these are not paid. Usually, where you sell your business, the sale and purchase agreement will set out what adjustments will be made to the purchase price to reflect any bad debts. If, however, you are a sole trader and are winding up your practice, you will have to arrange the collection of any outstanding invoices yourself. Whichever situation applies, if significant amounts are outstanding when you cease practising you should ensure you appreciate what the financial consequences will be if any of these remain unpaid.
Finally, even when all else has been sorted out, you may be asked to help resolve any issues arising from the work you did before you ceased practising. You may be obliged to help not only by the terms of the sale and purchase agreement or your retirement from the partnership but also under any professional indemnity policy covering you for claims arising after ceasing practice.
The issues discussed in this series are some of the main ones to address when you decide to stop practising. It will take some time for you to make the necessary arrangements to cease practising, and you should start planning the process well in advance of your intended retirement date. If you do, matters should run smoothly and you will be able to enjoy a happy retirement, with little or no need to worry about your former career.
Alexandra Anderson is a partner and Jonathan Angell is a consultant at Reynolds Porter Chamberlain firstname.lastname@example.org email@example.com
Related competencies include: Business planning