A few words on the suspension of a business activity

Joanna WILCZYŃSKA
Accounting Manager at RSM Poland

The suspension of a business activity causes a great deal of doubt on the part of the taxpayer, not only in the issue of the settlement of taxes and social insurance, but also in keeping the revenue and expense ledger. Let's take a closer look at the obligations that are connected with the taking of this decision and what simplifications the provisions foresee.

Suspension of business activity in keeping a revenue and expense ledger

Unfortunately, none of the provisions foreseen an exemption from keeping a revenue and expense ledger for the time of the suspension of the performed business activity. In practice, however, it may turn out that this may not include any business operations, which would be subject to disclosure in the tax ledger. In the course of the suspension of activities, all of the revenue subject to taxation and expenses that should be deemed as tax deductible expenses should be disclosed in the revenue and expense ledger.  The same rules regard both the period of conducting business activity as well as its suspension. If, in the course of the suspension, a business event occurs that needs to be disclosed in the tax ledger, then a relevant entry should be made in it. Most often such an event is the sale of a fixed asset, expenses for utilities or insuring a company asset.

A significant facilitation is the fact that there is no obligation to prepare a physical inventory neither as at the date of commencing the suspension of the business activity nor as at the date of its resumption. The suspension does not, however, release the taxpayer from preparing a physical inventory as at the end and the beginning of the fiscal year.

Suspension of business activity in keeping an accounting ledger

In theory, the entrepreneur suspending their business activity for a full fiscal year is exempt from the obligation to keep an accounting ledger. In theory, as in the case of the occurrence of operations of an asset or a financial nature, relevant postings should be made. Hence, the occurrence of any events of an asset or a financial nature during the year takes away the entrepreneur's entitlement of not having to keep the ledger.  Such events include, i.e.: the sale of a fixed asset, fees for office rental, electricity, the cost of keeping a bank account.

The Accounting Act, in differentiation from the tax provisions, does not give the entrepreneur the possibility of ceasing the depreciation expenses from the fixed asset components in the course of the suspension of the business activity. Hence, just the fact of possessing fixed assets, from which depreciation expenses are made (requiring disclosure in the accounting ledgers) also excludes the possibility of not keeping ledgers in the period of the suspension. We do, however, remember that in light of the Personal Income Act, the taxpayer not only can, but has to stop making  depreciation expenses. In consequence, we will have to conduct two methods for the depreciation of fixed assets - for balance sheet and for tax purposes.  After resuming the conducting of business activity, the  depreciation expenses will also have to be carried out in a dual manner.