UK VAT-registered businesses may be required to deregister when it ceases to make taxable supplies and, furthermore, businesses can deregister voluntarily should the value of taxable supplies made fall below the deregistration threshold of £83,000. Whether you are obligated to deregister or seek to deregister voluntarily, you must notify HM Revenue & Customs (HMRC) by filling out form VAT7, providing all the relevant information they need to handle your cancellation request. Alternatively, de-registration can be sought via the businesses’ government gateway account.

Below, the business tax experts at The VAT People outline the steps you must follow once you have deregistered for VAT, and if you should expect to pay back VAT on certain assets.

The day of VAT deregistration

If you cancel your registration voluntarily, you must inform HMRC of the date on which you want your VAT registration to end. This will either be the day they receive your request or a later agreed date. Until HMRC certifies they have cancelled your registration, you should keep charging and accounting for VAT in the normal way. You must continue collecting and recording VAT if HMRC rejects your request for VAT deregistration.

If at any point in the future, you exceed the VAT registration threshold, you must immediately contact HMRC with a view to registering for VAT. Failure to register on time will result in penalties.

Working out the final VAT return

On confirmation of deregistration, you will be required to submit a final VAT return covering the period up to the date registration ceases to be effective. Within this return, any VAT incurred on goods used in making taxable supplies, which are still on hand on the date of de-registration, may have to be paid back to HMRC. This is known as making a deemed supply. To work out the VAT owed, you will need to assess the relevant assets – this includes interests in land (on which the option to tax has been made) or tangible goods such as unsold stock, on which VAT has been recovered. Output VAT will need to be accounted for on these items calculated at the value you would anticipate paying for them in their current condition. If you cannot work this out, use the price you would anticipate paying for the same or comparable property or items.

Businesses are not required to account for VAT in this manner where the total gross (VAT inclusive) value of the relevant items is less than or equal to £6000. If the total gross value is above £6,000, output VAT should be accounted for on all qualifying items at the relevant rate within the business's final VAT return. It is crucial not to understate the amount of VAT that is owed on your final VAT return as doing so may result in the application of penalties

FAQs about paying back VAT when you deregister

How to deregister for VAT?

You may deregister your company and stop accounting for VAT on taxable supplies if your turnover is below the current VAT deregistration threshold of £83,000. To do so, you must submit Form VAT 7, which informs HMRC that you will no longer be paying VAT, or apply via your government gateway account in order to officially deregister from VAT.

To find out whether deregistration from VAT should be sought, on either a compulsory or voluntary basis, visit our guide here.

Learn more about VAT deregistration

The VAT People has long-standing experience in helping businesses with the process of VAT registration and deregistration. Our specialist team gives you the advice you need to best meet your VAT obligations and optimise your tax processes.

For tailored guidance, call us on 0161 477 6600, or fill out our contact form and we will get back to you at a more convenient time.