VAT Deregistration: How and When to Cancel Your VAT Registration

When can you deregister for VAT?

You can usually apply to cancel your VAT registration if you reasonably expect your VAT-taxable turnover over the next 12 months to be below the deregistration threshold of £88,000. The compulsory registration threshold is £90,000, and the lower deregistration figure stops businesses registering and deregistering repeatedly near the limit.

You must also tell HMRC within 30 days if you stop making taxable supplies, for example if you cease trading.

Should you deregister?

Deregistering stops you charging VAT and filing returns, but it also means you cannot reclaim VAT on costs. That can be costly if your customers are VAT-registered businesses who can reclaim the VAT you charge, or if you have large VAT-bearing costs. Staying registered is allowed even when turnover is below £88,000.

How to deregister

1. Check your expected taxable turnover for the next 12 months.
2. Apply to HMRC through your VAT online account or using the process on GOV.UK.
3. Provide your reason and the date you want cancellation to take effect.
4. File your final VAT return and pay anything due.

HMRC normally confirms the cancellation date in writing. Until then, keep charging VAT and filing returns.

VAT on stock and assets

When you deregister, you may have to account for VAT on stock and assets you still hold on which you reclaimed VAT. If the VAT due is £1,000 or less, HMRC does not require payment. If it is more, it is due with your final return.

Records after deregistration

Keep your VAT records for the period HMRC requires, normally six years. If your turnover later exceeds the threshold you must register again.

Sources

• GOV.UK: VAT registration thresholds
• GOV.UK: VAT registration

This article is general information based on UK rules as understood at the review date above. It is not personal tax or legal advice. Rates, thresholds and rules change; confirm the position for your situation with an accountant or on GOV.UK.