VAT Deregistration: What you Need to Know?
You must cancel your VAT registration if you are no longer eligible to be VAT registered. This can occur when you:
- Stop trading or making supplies that is liable for VAT taxation
- You join a VAT group
In case you are eligible for VAT cancellation, you must register for it within 30 days otherwise a penalty may be imposed upon you.
You can ask HM Revenue and Customs (HMRC) to cancel your registration if your VAT taxable turnover falls below the de-registration threshold of £83,000.
How to Cancel VAT Registration?
You can cancel online your VAT registration.
The other alternative is to download VAT 7 form, fill it and send it by post.
The Next Procedure
The HMRC normally takes around three weeks to confirm your de-registration and the official de-registration date.
This is either the date when the reason for your cancellation took effect (for example, when you stopped trading), or the date you asked to de-register if it’s voluntary.
If you have applied online, the confirmation will be sent by HMRC to your VAT online account.
In case you have not applied online, the confirmation will be sent by mail. It is not important to note that as soon as you apply for de-registration, you will have to stop charging VAT with immediate effect and also keep your VAT records for 6 years.
Additionally, HMRC will automatically re-register you if they come to the conclusion that you are not eligible for de-registration. Under such circumstances, you will also be required to pay VAT for the period you have not been paying it.
VAT after your cancellation
You are required to submit a final VAT return for the period till the date you have applied for de-registration. You must account for any stock and other assets you have on this date if:
- you could reclaim VAT when you bought them
- the total VAT due on these assets is over £1,000
The Notice about revised VAT de-registration guidelines since changes came into effect from April, 2017.
What is the Notice all about?
The notice lists out details about how and when you can cancel your VAT registration. It explains all the rules and guidelines that you need to follow if you are currently registered for making:
- Supplies that is taxable in the country
- Distance sales to customers in the UK who are not registered for VAT
- Acquisition of goods from VAT-registered members from other member states of the European Union.
- Relevant supplies of goods which are assets of a business
The notice also highlights the difference between compulsory and voluntary de-registration
Who is this notice for?
You need to read this notice carefully if you:
- Want to establish details of how you must, or can ask for your VAT de-registration.
- Want additional information for procedures to be followed to cancel your VAT registration.
Areas of law covered by this Notice
Schedules 1, 1A, 2, 3 and 3A of the VAT Act 1994 contain the provisions for cancellation of registrations.
Regulations 5(3) and 25(4) of the VAT Regulations 1995 provide the rules about notifying deregistration and the final VAT Return.
Online de-registration of VAT
You can cancel your VAT registration online or make other changes by using the online service provided by HMRC.
If you have any confusion, or are not fully aware of the form filling guidelines you can take the help of an agent. However, you must understand that as it is your business, the onus is on you to ensure that the form is filled accurately.
In an event if you wish to cancel your VAT registration, you need to log into your Government Gateway account and select ‘change registration details’. There you can find details of what changes you can make including deregistration.
If you’re already VAT registered and intend to create or join a VAT group
A person with a registered VAT cannot apply for another VAT registration. In an event if a group is created, the members included in it will have to cancel their VAT registration first. The group under the circumstances will be issued its own VAT registration number.
Additionally, any member joining the group at a later date will also have to cancel his existing registration.
If you’re already VAT registered and intend to join the Agricultural Flat Rate Scheme
The law does not permit you to be registered for VAT and as a flat rate farmer at the same time. As such, you will have to cancel your VAT registration.
For more information about:
- registering as a flat rate farmer
- the limited circumstances in which you might still be able to be VAT registered for other supplies
See VAT Notice 700/46: agricultural flat rate scheme for further information.
You were not eligible for VAT de-registration
The action HMRC takes in re-registering you for VAT will depend on the exact circumstances in which your registration was cancelled.
If HMRC notices that you have supplied false or misleading information to show that you are eligible for de-registration, then it will automatically re-register you. Under such circumstances you will be liable to pay all the existing dues.
If you become eligible for re-registration
In case you have become eligible for re-registration, you need to immediately notify HMRC about the same. You will be fined if you promptly fail to notify HMRC about the same.
You can ask for voluntary deregistration under following circumstances:
- If the HMRC is satisfied by your claim that your taxable turnover in the next 12 months will fall below the de-registration limit.
- You shut down a part of your business and the HMRC is convinced that the taxable turnover of the remaining business will not cross the deregistration threshold.
- Your turnover exceeds the registration limit but your taxable supplies are wholly or mainly zero-rated.
Also, please keep in mind that you are opting for voluntary de-registration on turnover grounds, you must explain to HMRC as to why you believe that the turnover is going to fall below the threshold limit.
How to cancel your Registration?
You can do this online or you can download and fill VAT 7 application form and send it to HMRC through the post. When you cancel your registration, you may have to account for VAT on any stocks and assets you have on hand.
When you’ll be deregistered?
If your deregistration is compulsory, your registration will be cancelled from the date:
- You sell your business
- Your legal status changes
- Your VAT group is disbanded
- You join a VAT group
- You cease supplying taxable goods
- You join agricultural flat rate scheme
- Your intention to make taxable supplies ceased
If you’re joining the agricultural flat rate scheme
If you’re cancelling your VAT registration so that you can join the agricultural flat rate scheme, you do not need to account for VAT on any of your business assets.
What HMRC will do when we get your application for VAT de-registration?
HMRC will send you a reply within 30 working days. If you’ve not heard from them by then, please contact VAT general enquiries if there is no correspondence from their side within this period.
If HMRC is satisfied that your registration should be cancelled, they’ll send you a formal notice confirming the date on which your VAT registration was cancelled.