How do I deregister for VAT?

You’re VAT registered, but wondering if you need to be, and have come to ask “how do I deregister for VAT”.

If you’re looking for answers on whether you need to register for VAT or not, we also have a blog on that – if you head on over.

You can really feel the pressure if your business is hovering around the VAT registration threshold of £90,000 (at April 2024). This can be a huge financial commitment, so it’s worth checking whether you can deregister for VAT, as it may ease some of the pressure for you.

Are you allowed to deregister?

Firstly, let’s see if you meet the criteria to be able to deregister for VAT.

The deregistration threshold is currently £88,000 (as at April 2024) but this is set by the Government’s Budget each year.

If your VATable turnover is below this, then you can deregister.

Note: the registration threshold is currently £90,000, so the deregistration threshold is less.

Other reasons to deregister:

  • you’ve stopped trading and you’re not part of a VAT group
  • you’ve stopped making VAT taxable goods or services
  • you’re applying for an exemption if most or all of what you sell is VAT zero-rated

When you can’t deregister:

If you and your business are based outside the UK, but sell into the UK, the VAT thresholds do not apply to you.

You will be classed as a Non-Established Taxable Person (NETP).

This means that all of your UK sales are VATable. More info from HMRC here, and we are also able to advise.

Do you have to deregister if you go below the deregistration threshold?

You don’t have to deregister if your VATable turnover dips below the 12 month threshold, you can stay registered for VAT.

There are benefits to being VAT registered, even if you don’t need to be, and we cover these in our VAT registration blog.

But what does the threshold mean?

1. How do you calculate your VATable turnover for the threshold?

To see if you are near the threshold, you need to look at your rolling 12 month turnover.

So, at the end of each month, total up the previous 12 months turnover. This is very easy if you have online accounting software, and you’re keeping it up to date. All you need to do is set your own dates in your Profit and Loss report, and you’ll have your rolling 12 month turnover.

If you’re below £83,000 for the previous 12 months, then you should be able to apply to de-register, as long as you have no reason to believe that you will exceed this in the following months.

2. What is included in your VATable turnover?

Make sure you include everything relevant, when you’re looking at whether to register or deregister for VAT. You should look at your turnover before adding on VAT, or your net turnover.

For example, if you charge £1,000 for a service, the VAT would be £200 (£1,000 x 20%) so it’s just the £1,000 you’re using for your VATable turnover, not the £1,200.

Your VATable turnover is the value of everything you sell, that is not exempt from VAT (more guidance here on what’s exempt).

You should also include:

When can’t you deregister?

You are not able to deregister if you and your business are based outside the UK, and you supply any goods or services to UK.

In this instance there is no registration or deregistration threshold. All your sales to the UK are VATable.

How to deregister for VAT:

Deregistering online:

You can cancel online, and will need your Government Gateway logins for your VAT account.

You can start the deregistration process here.

Deregistering by post:

You can’t deregister online if any of the following apply:

  • your legal status has changed and you want a new VAT registration number
  • you’ve sold your business and the owner is not keeping the VAT registration number
  • your VAT group is closing (‘disbanding’) – you’ll also need to complete a VAT50-51 form and send both forms together to HMRC

Here’s the paper deregistration form VAT7 for you to download and print.

How long it takes to deregister:

It can take up to 3 weeks following your application for HMRC to confirm your deregistration.

You must stop charging VAT from the date that you deregister.

There is likely to be one final VAT return due up to the date of your deregistration. If you’re using online accounting software linked to HMRC for MTD, this will automatically update with the correct dates.

You will still need to keep your VAT records for 6 years.

What goes on the final VAT return:

Sales and Purchases

You’ll need to declare sales from the date of your previous VAT return up to the date of your deregistration, in the usual way.

If you’re on cash accounting for VAT you will need to declare all unpaid sales invoices on your final VAT return.

You can also claim VAT on costs up to the date of deregistration.

If you incur any costs after the date of deregistration, that specifically relate to the period before deregistration, you can also include those.

A good example is your bookkeeping or accountancy fees for preparing the final VAT return.

VAT on Assets and Stock

If you still own stock or assets at the date of deregistration, you may have to pay VAT back on your last return, if the following apply:

  • You originally claimed VAT on the assets or stock, or could have claimed VAT.
  • The total VAT on stock and assets still held is over £1,000

Deadlines for submitting your final VAT return:

  • 1 month from cancelling if you’re on the Accrual scheme for VAT
  • 2 months from cancelling if you’re on the Cash accounting scheme

What’s next?

  • Make sure you update your accounting, sales and inventory software to remove your VAT number and VAT rates from the date of cancellation.
  • Remove your VAT number from all correspondence including invoicing, quotes, purchase orders, website, stationery etc.
  • Let your customers and suppliers know that you are no longer VAT registered and from what date.
  • Keep an eye on your rolling 12 month turnover incase you stray back into the VAT threshold.

Get in touch

If you’d like support with your VAT registration, deregistration or NETP status. We can also prepare, check and submit your VAT returns, with our team of qualified bookkeepers.

Go to our Start Page and request a call back!