How to Deregister From VAT In The UK
Updated: Feb 8
Value Added Tax (VAT) is a tax on goods and services that is levied by the government in the United Kingdom. Most businesses with a taxable turnover above £85,000 are required to register for VAT and charge VAT on their sales. However, there may be circumstances under which a business may need to deregister from VAT.
De-registration of a VAT can result in extreme outcomes for a business, particularly one wherein taxable materials are being made and are contemplated. An enterprise without a VAT No. is not likely to get any business contracts. It would now not be able to issue tax invoices charging VAT or displaying a VAT registration number, and could not claim back input tax. It is therefore essential to take professional recommendations early and attraction the choice at right time.
Why Should You Deregister From VAT?
You should cancel your registration if you’re not eligible to be VAT registered. For example:
1. You forestall trading or making VAT-taxable substances
2. You join a VAT organization
3. If your VAT taxable turnover falls beneath £83,000
You should cancel within 30 days in case you stop being eligible otherwise you is probably charged a penalty.
Here are the steps for deregistering from VAT in the UK:
Determine eligibility for deregistration: A business can only deregister from VAT if its taxable turnover is below the VAT registration threshold of £85,000. If the business’s taxable turnover exceeds the threshold, it must continue to be registered for VAT.
Notify HM Revenue and Customs (HMRC): Once the business has determined that it is eligible to deregister from VAT, it must notify HMRC by submitting a written request to deregister. This can be done by filling in the form VAT7 and submitting it to the HMRC.
Complete and submit a final VAT return: Before deregistering from VAT, a business must complete and submit a final VAT return to the HMRC. This return must cover the period up to the date of deregistration and must include any outstanding VAT payments.
Pay any outstanding VAT: Before deregistering from VAT, a business must pay any outstanding VAT payments. If a business fails to pay the outstanding VAT, it may be subject to penalties and interest charges.
Wait for HMRC confirmation: Once the final VAT return has been submitted and any outstanding VAT has been paid, the business must wait for HMRC to confirm the deregistration. This confirmation will be in the form of a letter from the HMRC, which will confirm the date of deregistration and any further action that may be required.
Update business records: Once the deregistration has been confirmed by the HMRC, the business must update its records to reflect the change. This may include updating invoices, receipts, and any other business documentation.
You need to account for any stock and other property you have got at the de-registration date if: you can reclaim VAT when you got them; the full VAT due on that property is over £1,000.
It is important to note that once a business has deregistered from VAT, it cannot reclaim any VAT it has previously paid on purchases. Additionally, the business may not be able to reclaim VAT on goods or services that are still in its possession or that have been acquired but not yet used.
What Occurs Next
It typically takes 3 weeks for HMRC to confirm your cancellation and the respectable cancellation date. This is both the date when the reason for your cancellation took impact (as an example, when you stopped trading), or the date you asked to cancel.
· HMRC will send a confirmation in your VAT online account or thru the put-up in case you do no longer observe online.
· You must stop charging VAT from the cancellation date. You’ll need to hold all VAT records for six years.
· HMRC will automatically re-register you in the event that they realize you should not have cancelled. You’ll need to account for any VAT you should have paid in the interim.
· You’ll want to submit a final VAT Return for the duration as much as and which includes the de-registration date.
What if I Want to Transfer VAT Registration?
You can switch VAT registration from one commercial enterprise to another. You would possibly do this if you buy an organization and need to keep the use of its VAT number. You can practice switching a VAT registration online (thru your VAT online account) or via put up have you decide on, using shape VAT68.
You, the purchaser of the business, as well as the seller of the enterprise, have to notify HMRC. The seller must cancel any Direct Debits on their VAT online account and you (the purchaser) ought to set up new ones. Normally it takes three weeks for HMRC to verify the transfer.
In What Situations Can HMRC De-register a VAT Number Itself?
HMRC can exercise its powers beneath paragraph thirteen of Schedule 1 of the VAT Act 1994 to cancel a VAT registration by itself. The two major reasons are that HMRC conclude after research that an organization is either now not making taxable materials or a Commissioner believes that the organization has been registered with the main goal of the registration to facilitate fraud in the VAT system.
In cases wherein fraud is alleged, the onus is on HMRC to establish that fraudulent activity has occurred. Fraud is a severe accusation to level and HMRC ought to be required to provide evidence of this at the outset. Under such a situation, deregistration would usually be a step taken after months of research by way of HMRC into a company’s affairs.
The HMRC Appeal Process in Case HMRC De-register a VAT Number
If a taxpayer disagrees with HMRC regarding a VAT de-registration selection, there's a 2-level process for a taxpayer to dispute an HMRC selection:
Stage 1: Provide notice to HMRC. A taxpayer can give notice in writing within 30 days of HMRC’s notice of their selection. As a result of this, HMRC can maintain their decision, amend it or agree to the taxpayer’s evaluation.
Stage 2: if the taxpayer’s claim cannot be agreed upon by HMRC in the first step then a taxpayer can avail himself of two in additional options:
i. HMRC can offer an inner assessment of the dispute. The assessment is an entirely internal procedure conducted by an HMRC officer, other than the original decision-maker.
ii. A taxpayer can appeal to the First Tier Tax Tribunal if the taxpayer does not agree with the internal review. The tribunal will make a decision on the case. A further appeal is authorized if a taxpayer does now not consider the decision.
Deregistering from VAT in the UK requires careful consideration and attention to detail. A business must determine its eligibility for deregistration, notify the HMRC, complete and submit a final VAT return, pay any outstanding VAT, wait for confirmation from the HMRC, and update its business records. Failure to follow these steps correctly could result in penalties or other consequences. It is recommended that businesses seek professional advice before deregistering from VAT.