If sales are slowing down in your business and forecasts look like your taxable turnover will bring you under the VAT threshold, it’s probably time to consider deregistering for VAT.

You can only do this if your business expects its taxable sales in the next 12 months to be under the deregistration threshold, which is £83,000.

For example, Glynn and Tina are a VAT-registered partnership trading as barristers.

They have no employees, both work full time in the business and the total annual fees of the partnership in the previous tax year were £120,000.

Glen decides to retire from active work on 30 June 2018 and becomes a sleeping partner, leaving Tina as the only fee earner with expected annual sales of £60,000 over the next 12 months.

The business can voluntarily deregister on 30 June 2018 as taxable turnover falls below the deregistration threshold of £83,000.

Voluntary deregistration is always about future sales, instead of historic turnover, and can only be requested on the present or a future date.

What happens next?

You have 30 days to cancel your registration on HMRC’s website. You will need your government gateway user ID and password to login. Alternatively, you can complete and send in form VAT7.

The Revenue will be in touch within 3 weeks to confirm your deregistration and the date it will take effect. The date will either be the date you stopped trading or the date you asked to deregister.

You must stop charging VAT from this date, but you will still be required to keep VAT records for 6 years.

After you deregister

You will have to submit a final VAT return  for the accounting period up to and including your deregistration date.

You will need to account for any stock or assets that you could reclaim VAT on when they were purchased or had a VAT liability of over £1,000 when purchased.

It’s also advisable to be proactive – don’t wait for all your invoices to arrive before you submit your final VAT return.

You will be able to reclaim VAT on any items bought during the final accounting period after you receive the invoices for them.

Contact us to discuss deregistering for VAT. 

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