How to Deregister for VAT - A Step-by-Step Guide

If you’ve found this article, you may be thinking of a common question: “Can I deregister for VAT?”. When a business deregisters from VAT, they tell HMRC that they no longer want to charge VAT on their goods or claim VAT back on their purchases. Deregistration is only possible if your business’ turnover is below the deregistration threshold, or your business is closing or restructuring. These are also the main reasons why businesses pursue deregistration from VAT.

This article will break down the reasons for deregistering when to deregister from VAT, a step-by-step guide to deregistering and what to expect after your deregister from VAT. 

Why Deregister from VAT? 

There are a few key reasons why a business might pursue VAT deregistration. Such as:

• Turnover below the deregistration threshold: A business can deregister from VAT if its 12-month turnover (pre-tax) is below £88,000. Businesses may also choose to voluntarily deregister in this way because their taxable turnover has fallen below the threshold. When deregistering you must provide proof to HMRC that your turnover is below £88,000 and provide a reason as to why you are deregistering – we’ll dive into the specifics of this below.
• Ceasing VAT-taxable Activities: You can only charge VAT if your business trades or makes taxable goods or services. However, you may find yourself no longer selling taxable goods or services or you may have registered for VAT with a plan to sell these goods or services, but it never happened. 
• Business Closure or Sale: If your business is closing down or has been sold, you no longer need VAT and will need to deregister, it’s as simple as that! 
• Financial and Administrative Benefits: You may be noticing that your turnover stays consistently under the deregistration threshold and you are spending too much time and money on VAT activities – this is a good sign to deregister from VAT. Your administrative and financial burdens will ease, and you always have the option to register again when your business is ready. 

When to Deregister for VAT

Businesses can choose to deregister from VAT or face compulsory deregistration. The key differences between compulsory and voluntary deregistration are easily defined. 

Compulsory Deregistration

A business must cancel its VAT registration if it is no longer eligible for to be registered. This can be for a number of reasons: 

• Your business ceases all income streams entirely, because it has stopped trading, or its been taken over. 
• Your business joins a VAT group, and all future transactions will be reported by the group. 
• Your business is still trading but your taxable income ceases. 
• You Sell your business.
• Your business changes legal structure, i.e. from a Sole Trader to a Limited Company.

You must cancel your VAT within 30 days if you stop being eligible or you could face a penalty. 

Voluntary Deregistration 

Of course, you can choose to deregister if things in your business change. This is often due to your business’ turnover falling below £88,000. This can happen for a number of reasons:

• You have reduced your operating hours. 
• You have lost clients or customers. 
• You have lowered prices.
• You have changed your product/services and seen a drop.
• A drop in demand for your services/goods. 
• Your business is recovering from loss of business or temporary closure.

You must provide a specific reason and proof that your taxable turnover is under £88,000 for 12 months. Essentially, you need to assure HMRC that your turnover is low and will remain low in the next 12 months which allows you to justify your deregistration.

Step-by-Step Guide to Deregister for VAT

The process of deregistering for VAT can be done online through Government Gateway.. Here’s our step-by-step guide to take you through the VAT deregistration process, and show you how to cancel a VAT registration. 

Step One: Gather Your Details to Deregister for VAT

You’ll need to prepare a few things such as your VAT registration number, the full, official name of your business, contact phone number, your company’s trading address, reason for deregistration, and the date when you wish to cease VAT activities. 

Step Two: Submit Your Deregistration Request 

• Online Submission Via HMRC: You can deregister for VAT online through your Government Gateway account. Simply log on, and select ‘deregister for VAT’ and follow the prompts. 
• Alternative methods: If you cannot cancel online, you can apply to deregister via post using the VAT7 form from your VAT online account. Alternatively, you can also use an accountant or tax professional to file for deregistration on your behalf. 

Step Three: Final VAT Return

Then you’ll need to file your final return for the period leading up to your date of deregistration. The deadline for filing your final VAT return is one month after your cancellation date.

There is also no need to wait for all your pending invoices before filing your final return. You can reclaim VAT on them as and when you receive them, provided the charges happened in the past 4 years.

Step Four: VAT Accounting on Remaining Stock 

You also need to account for stock and business assets you own if:

• You reclaimed or could have reclaimed VAT on them at the time of purchase
• And if the total value of the assets is greater than £1000. 

Step Five: Keep your VAT Records 

After you deregister you must keep your past VAT records, including correspondence from HMRC, for up to six years. This is in case HMRC wishes to review your past VAT transactions or if you are audited. 

Quick Recap

The VAT deregistration doesn’t need to be complicated. In fact, with the online deregistration process, you can deregister for VAT in no time. However, if your VAT situation has any complexities make sure you consult with an accountant or tax professional before starting the process.

Don’t forget, that you can always re-register for VAT if your circumstances change. If you’re looking for help in order to register for VAT online, we’re here for you! We can help ease the burden of registering for VAT with our VAT Registration Service.