4 Min. Read

VAT Deregistration: Tips & Guide

March 15, 2024

When you run a small business, you have ups and downs. As such, you may choose to cease trading when another opportunity comes up. One of the things that come from ceasing to trade is VAT deregistration. If you need to know more about deregistering for VAT, keep reading our guide! We’ll include how to go through VAT deregistration, and some helpful tips for the process.

Here’s What We’ll Cover:

What Is VAT?

When Are You Able to Start the Deregistration Process?

What if I Elected to Register for VAT?

VAT Registration Must Be Cancelled Online

Key Takeaways

What Is VAT?

VAT is more commonly known as Value-Added Tax. It is a method of tax collection that taxes a product at every stage of development where value is added. The amount of VAT that is added depends on the cost of the product. It is a form of consumption tax.

Who Has to Register for VAT?

VAT registrations are required for a variety of businesses. Thankfully, you can complete VAT registrations online. Additionally, all the information you’ll need to cancel the registration is available online, and in this article! If your company falls under any of the following criteria, you’ll have to complete VAT registration:

You meet the VAT registration threshold of £85,000 in the next 30 business days
You have met the VAT registration threshold of £85,000 over the last 12 months

When Are You Able to Start the Deregistration Process?

If your business is no longer producing, then you may be able to submit an application for VAT deregistration. Here’s how you know whether or not you’re able to start the process:

You have ceased to trade
Your income has fallen below the standard threshold for taxable turnover
You were registered in error
Your business is no longer producing taxable supplies

Taxable supplies are determined by HM Revenue and Customs (HMRC) authority. If you have fallen into any of these categories, you can start the deregistration process.

Notify Your Revenue Office

If you fall into any of the categories above, then you are able to contact the Revenue office to begin deregistration. If you fail to notify your office then you will still be sent forms for VAT returns and demands. The Revenue office can also assist you in cancelling your VAT registration if it is inappropriate.

What if I Elected to Register for VAT?

Voluntary deregistration can be a bit more difficult if you are voluntarily elected to register for VAT. As such, there’s a slightly different process. Separate rules will be applied to you, and cancellation of VAT registration will take a few extra steps. Here are tips on how to deregister if you’re an elected person.

Deregistering as an Elected Person

If you voluntarily registered for VAT then you can work with your Revenue office to deregister. When you choose to deregister, you’ll have to pay Revenue any excess of VAT refunded to you. The review period for this is as follows:

The taxable periods during which the election had an effect
Three years prior to the date of cancellation

The period of time that applies to your business will be the lesser of the two.

How Do I Calculate What I’ll Owe Revenue?

The amount that will need to be repaid to Revenue is based on a simple equation.

(A + B) – C

In this equation, the variables are as follows:

A is the amount of tax repaid to you during the review period.

B is the tax deductible made by you during the review period.

C is the net total amount of tax paid by you in the review period.

As you can see, calculating what you’ll owe isn’t too difficult. It’s also a great way to prepare yourself for possible costs associated with deregistration.

VAT Registration Must Be Cancelled Online

HM Revenue and Customs authority require that VAT deregistration take place online. Thankfully, if you’re having an agent assist you in the matter, they are able to do so in your place. However, all information must be certified as accurate by you. Again, it’s important to realize that you must begin the deregistration process. The Revenue office won’t do so, and until you have deregistered you will continue to be sent forms and demands regarding VAT.

Key Takeaways

HMRC makes VAT deregistration easy, so long as you know that you’re eligible to deregister. Deregistration takes place online, and an agent can assist you with it. You must notify the Revenue office once you’ve realized that you’re eligible for cancellation.

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