VAT De-Registration

A lot of businesses have been hit extremely hard by the COVID-19 pandemic and are exploring the possibility of de-registering for VAT. If you stop providing taxable goods or services or your turnover falls below the de-registration threshold of £83,000 within a 12-month period, your business can voluntarily ask HMRC to cancel its VAT registration.

It is compulsory to cancel your vat registration if:

  • You sell your business or the business ceases trading;
  • Your legal status changes for example from a limited company to a Sole-trader (although you can keep your VAT registration number);
  • You join a VAT group as you cannot have two VAT registration numbers.

If any of the above applies please be aware that you should de-register within 30 days of when you stop being eligible or you will be charged a penalty.

With regards to Voluntary de-registration there are some things you need to strongly consider before you take this step:

  • By de-registering you lose your ability to claim VAT on all purchases;
  • You should also keep track of your turnover as if your turnover goes above the VAT threshold you will be penalised;
  • You are required to fill a final VAT return, and, on that return, you must account for the market value of your assets including stock. Output tax is payable on these items if the VAT payable is over £1,000;
  • You must also include interests in land if they would be taxable if you sold them, for instance where an option to tax has been made;
  • HMRC can choose to re-register you if it believes you wrongly cancelled, and you will be required to pay any VAT you should have paid.

Therefore, you should seek professional advice before you choose to do this.

If you would like to discuss VAT in more detail, please contact Antoinette Hope via