How to Deregister for VAT in the UK?

Value Added Tax (VAT) is a tax on goods and services in the UK. If you're a VAT-registered business, you have to charge VAT on your sales and pay it to HM Revenue and Customs (HMRC). However, if your taxable turnover falls below the VAT threshold or if you're no longer trading, you may want to deregister for VAT. Here's how to do it:

Step 1: Determine if You Need to Deregister for VAT

Before you start the process of deregistering for VAT, you need to be sure that you are eligible to do so. There are several reasons why a business might need to deregister for VAT, including:

• Ceasing trading or selling your business
• Falling below the VAT registration threshold (currently £85,000 per year)
• No longer making taxable supplies in the UK or the EU
• Joining a VAT group and no longer making taxable supplies on your own
• If any of these reasons apply to your business, you may be eligible to deregister for VAT.

Step 2: Notify HMRC

If you have determined that you need to deregister for VAT, the first step is to notify HM Revenue and Customs (HMRC). This can be done by completing form VAT7. This form can be downloaded from the HMRC website or requested from the VAT Helpline.

You will need to provide the following information on the form:

Your VAT registration number

The date that you stopped making taxable supplies or the date that your turnover fell below the VAT registration threshold

The reason for your deregistration

The value of any stock and assets that you have on hand at the time of deregistration

The date that you expect to sell or transfer your assets

Once you have completed the form, you should send it to the VAT Helpline or submit it online through the HMRC website.

Step 3: Submit Your Final VAT Return

After notifying HMRC of your intention to deregister for VAT, you must submit your final VAT return. This return will cover the period up to the date of deregistration.

In your final VAT return, you must account for all VAT due up to the date of deregistration, including any outstanding VAT from previous returns. If you have reclaimed any input tax on purchases, you must account for this as well.

Step 4: Pay Any Outstanding VAT

If you owe any VAT to HMRC, you must pay this before you can deregister for VAT. This can be done online, by phone, or by post. If you have any outstanding VAT returns or penalties, these must also be paid before you can deregister.

Step 5: Keep Records

After deregistering for VAT, you must keep records for at least six years. These records should include all invoices and receipts, as well as any other documents relating to your business transactions.

It is important to note that if you deregister for VAT voluntarily, you cannot register again for at least two years. If HMRC requires you to deregister, you may be able to register again sooner.

If you have not yet registered for VAT, but you believe that you will need to in the future, you should still keep records of your sales and purchases. This will make it easier to complete your VAT registration when the time comes.

Conclusion

Deregistering for VAT in the UK can be a straightforward process if you follow the steps outlined above. It's important to ensure that you're eligible to deregister, calculate your taxable turnover, notify HMRC, pay any outstanding VAT, and keep records. By doing so, you can avoid penalties and ensure that you comply with HMRC regulations.