VAT deregistration means cancelling your VAT registration, so you stop charging VAT and filing VAT returns. In the UK, you can ask HMRC to cancel if your taxable turnover falls below £88,000. You must cancel within 30 days if you’re no longer eligible to be registered – for example, if you stop trading or making VAT taxable supplies. This guide explores VAT deregistration, including when and how to deregister for VAT, the VAT deregistration threshold, and completing a VAT deregistration form.

What Is VAT Deregistration?

VAT deregistration is the process of formally removing a business from the VAT register. Once deregistered, the business must stop charging VAT from the cancellation date and no longer submits VAT returns after its final one.

When Should You Deregister for VAT?

In the UK, you can or must deregister for VAT in the following circumstances:

  1. Voluntary Deregistration:
    • Your taxable turnover falls below the deregistration threshold of £88,000, which is below the £90,000 registration threshold.
  2. Compulsory Deregistration (within 30 days of no longer being eligible):
    • You stop trading or making VAT taxable supplies.
    • You join a VAT group.
    • You sell your business and the new owner isn’t taking over your VAT registration number.

How to Deregister for VAT

If you’re wondering how to deregister for VAT in the UK, the process involves these steps:

  1. Check Your Eligibility: Confirm whether you can cancel voluntarily or must cancel.
  2. Submit a VAT Deregistration Form: You can cancel online if, for example, you’ve stopped trading and aren’t part of a VAT group, or your taxable turnover is below £88,000. You must use form VAT7 by post if, for example, your legal status has changed and you want a new VAT number, or you’ve sold your business and the new owner isn’t keeping the VAT number.
  3. Submit Your Final VAT Return: Cover the period up to and including the cancellation date, and submit it by the due date.

What Is the VAT Deregistration Threshold?

The VAT deregistration threshold is the turnover limit below which a business can choose to deregister voluntarily. In the UK, it’s £88,000 of taxable turnover.

Completing the VAT Deregistration Form

To cancel online in the UK, you’ll need the sign-in details for your VAT online account. If you use the VAT deregistration form VAT7, you must fill it in fully before you can print it – you can’t save a partly completed form – then post it to HMRC at the address on the form.

What Happens After You Deregister VAT?

Once you complete the process to deregister VAT:

  • You will receive confirmation from HMRC, including your official cancellation date. HMRC usually confirms within 40 working days.
  • You must stop charging VAT from that date.
  • You must account for stock and assets you still hold if you reclaimed VAT on them and the VAT due is over £1,000.
  • You must keep all VAT records for 6 years.

Advantages of VAT Deregistration

  1. Reduced Administrative Burden: No more VAT returns after your final one, although you must still keep your VAT records for 6 years.
  2. No VAT on Your Sales: You stop charging VAT from the cancellation date.

Challenges of VAT Deregistration

  • Loss of Input VAT Recovery: You will no longer be able to reclaim VAT on business purchases.
  • Asset VAT Payments: VAT may be payable on stock and assets you still hold at the cancellation date.
  • Re-registration: HMRC will automatically re-register you if it realises you shouldn’t have cancelled, and you’ll have to account for any VAT you should have paid in the meantime.

Conclusion

Understanding how to deregister for VAT is essential for businesses that no longer meet the criteria for VAT registration. From completing a VAT deregistration form to considering the VAT deregistration threshold, cancelling on time matters: in the UK, you must cancel within 30 days of no longer being eligible or you might be charged a penalty.

Source: HMRC - Register for VAT: Cancel your VAT registration, HMRC - Register for VAT: When to register