There are various circumstances in which a client may want or need to cancel their VAT registration.
A client who is VAT registered because they make taxable supplies in the UK must cancel their registration if any of the following occur:
- they stop making taxable supplied;
- they sell their business (although the VAT registration number can be transferred to the new owner);
- their legal status changes;
- they are a member of a VAT group which disbands;
- they join a VAT group; or
- they join the agricultural flat rate scheme.
A client can also ask for voluntary de-registration if:
- they are able to satisfy HMRC that their taxable turnover in the next 12 months will not exceed the de-registration limit (currently £83,000);
- they close down part of the business and are able to satisfy HMRC that the taxable turnover from the remaining business will not exceed the de-registration threshold;
- their turnover exceeds the registration limit but their supplies are wholly or mainly zero-rated; however, they can only de-register voluntarily if their input tax normally exceeds their output tax (although in these circumstances it is arguably better to remain registered to enable the client to recover the excess input VAT).
Where a client needs or wants to cancel their VAT registration, and is eligible to do so, this can be done online or by post by completing VAT form 7. However, when cancelling a registration, it may be necessary to account for VAT on stocks and assets. Where de-registration is compulsory, it will take effect from the date of the trigger event necessitating the cancellation of the VAT registration. Where de-registration is voluntary, this can be effective from the date that HMRC receive the application, or such later date as is agreed with HMRC.
Clients must continue to charge and account for VAT until HMRC confirm that the registration has been cancelled.
With last year’s changes to the flat rate percentage for limited cost businesses and the advent of MTD for VAT, clients may wish to assess whether it is beneficial to remain VAT registered if they do not need to be.
Written by the Tax Advice Network