Wondering how you digester for VAT in the UK? This guide should help get you started.
What Does VAT Deregistration Mean?
Businesses in the UK must register for Value Added Tax (VAT) with the HMRC if they have a taxable turnover exceeding £85,000 in a 12-month rolling period, or if the business expects to meet and exceed this amount within the following 30 days.
It is also possible to voluntarily register for VAT if the company’s turnover is below this threshold.
But, sometimes a VAT-registered business wants to cancel this registration or might be required by law to cancel. This cancellation is called “VAT deregistration”.
You will no longer be charging VAT to your customers on your products or services, and your business may have to make some structural or legal changes after deregistration.
When Can You Deregister For VAT?
There are several instances in which a VAT-registered business can deregister, which can be divided into either compulsory or voluntary deregistration.
You must legally deregister if you are no longer eligible for VAT registration. This includes:
- Falling below the HMRC VAT threshold of £83,000 (and knowing you will not exceed this threshold in the coming 12 months)
- You stop trading taxable supplies or services
- You join a VAT group
- Your company no longer trades
- You sell your company
- There is a change in the legal status of your company (for example, from a limited company to a sole trader)
- You join the Agricultural Flat Rate Scheme
If there is a change of ownership or a change in the legal status of the company, you could also consider a VAT registration transfer through the HMRC.
If your VAT taxable turnover is less than £83,000 you can voluntarily register – and deregister – for VAT. The reason the cancellation threshold is £2,000 less than the registration threshold is so that companies do not constantly have to register and deregister as their turnover fluctuates.
How To Cancel Your VAT Registration
You can cancel your VAT registration online through the Government’s portal. You simply need your Government Gateway user ID and your password to start the deregistration process.
Once you sign into your account, select “deregister for VAT”. You will be asked to provide the following information:
- VAT number
- Name of business (trading name)
- The trading address
- Contact information
- Reason for deregistration and any relevant information
- The date on which you want to deregister
Cancelling by post
Start by completing form VAT7. You can fill the form out online, and then print it and post it to the HMRC. You will find the address on the form.
You have to complete the form online before printing it – there is also no option to save the form as you go.
For that reason, it’s best to have all the information about your company to hand. The HMRC has published a guide to help you complete the form fully.
What Happens After You Deregister for VAT?
It could take HMRC up to three weeks to get back to you after submitting your cancellation.
You will either be notified via your VAT online account or the post (whatever method you used to cancel), and your official cancellation date will be included in the notice.
From that date, you need to stop charging VAT on your taxable supplies and services. It’s recommended that you keep your VAT records for at least six years, even after deregistering.
VAT After Cancellation
Once deregistered, you will still have to submit one final VAT return for the period up until your VAT registration cancellation date.
You will have to take into account any stock or assets that you have on your official deregistration date if you:
- Reclaimed, or could’ve reclaimed, VAT when the assets were bought
- VAT on the assets is more than £1,000
Your final VAT return should be issued within 30 days from your deregistration date (unless you are part of the Cash Accounting Scheme, in which case you have two months)
You will also have to update all your company documentation, like your invoices, emails, receipts and website, that contain your VAT registration number
VAT deregistration is a pretty straightforward process, whether you do it online or via post.
Still, if you’re uncertain about your VAT responsibilities and record-keeping, then it’s best to enlist the help of a professional accountant to help you determine whether you meet the VAT registration threshold and are eligible for deregistration.