How to deregister for VAT: cancelling your VAT registration

When must you cancel your VAT registration?

You must cancel your VAT registration within 30 days of the company no longer being eligible to be registered, for example because it stops trading or stops making VAT taxable supplies. If you miss the 30 days, HMRC may charge a penalty.

Joining a VAT group is different. GOV.UK's cancellation page lists it as an example, but the same page also says you do not need to cancel your registration when you join a VAT group or when a single company in a VAT group closes down: you complete a VAT50-51 amend form instead, not VAT7.

VAT Notice 700/11 adds other cases. They include selling the business, a change of legal status (for example a sole trader forming a company) and disbanding a VAT group. Closing a company usually means it stops making taxable supplies, so the VAT registration must be cancelled as part of the closure.

A company that stops trading but plans to restart is different. GOV.UK says that if you plan to restart trading, you send nil VAT returns while the company is dormant. If you do not intend to trade again, you must deregister within 30 days of the company becoming dormant. See making a company dormant for the other steps.

Source: Register for VAT: cancel your registration

When you can choose to cancel: the £88,000 threshold

If your taxable turnover falls below £88,000, you can ask HMRC to cancel your registration. This is called voluntary cancellation. It is a different figure from the £90,000 registration threshold.

HMRC needs to be satisfied that your taxable turnover in the next 12 months will not go over £88,000. Tell HMRC why turnover is falling, for example shorter opening hours, lost contracts or a change in how you work. Tell HMRC what you expect turnover to be over the next 12 months. Work the figure out without VAT.

HMRC will not agree if the fall in turnover is only because you plan to stop trading, or stop making taxable supplies, for 30 days or more in the next 12 months. Businesses based outside the UK that supply goods or services to the UK cannot use this route.

Source: VAT Notice 700/11: cancelling your registration

When not to cancel

If you sell the business or change its legal status and want to keep the same VAT number, transfer the registration instead of cancelling it.

If one company in a VAT group closes, or you join or create a VAT group, you use the VAT50-51 group forms instead. Check GOV.UK before you apply.

Source: Register for VAT: transfer your registration

How to deregister for VAT: online or by VAT7

You can cancel online through your HMRC business tax account if you have stopped trading and are not in a VAT group, your taxable turnover is below £88,000, or you have stopped making VAT taxable goods or services.

You must cancel by post on form VAT7 if your legal status has changed and you want a new VAT number, you have sold the business and the new owner is not keeping the VAT number, your VAT group is closing, or the business stopped trading after liquidation. You fill in the form on screen, print it and post it to the address on the form. You cannot save a part-completed form.

Before you apply, work through these steps:

1. Decide which route applies: online or form VAT7.
2. Gather your VAT number and HMRC sign-in details.
3. Note the date you stopped trading, or the date you want cancellation to start.
4. List the stock and assets you still hold, with their values.
5. Apply online, or print and post the completed VAT7.

Source: Register for VAT: cancel your registration

What happens after you apply

HMRC usually confirms cancellation within 40 working days, although it can take longer at busy times. If you applied online, the confirmation goes to your VAT online account. Otherwise it comes by post.

The confirmation gives your official cancellation date. For compulsory cancellation, this is usually the date the reason took effect, such as the date you stopped trading. For voluntary cancellation, it is the date HMRC receives your application or a later date you agree with HMRC. It cannot be backdated, and you keep charging VAT until HMRC confirms the cancellation.

From the cancellation date you must stop charging VAT and must not issue invoices showing your VAT number. If HMRC later finds you should not have cancelled, it will re-register you and you must account for the VAT you should have paid. Keep your VAT records, including the cancellation notice, for 6 years. If you have an EORI number, HMRC cancels it at the same time, so check first if you still need it for customs.

Source: Register for VAT: cancel your registration

Your final VAT Return

You must send a final VAT Return for the period up to and including the cancellation date. It is due by the date HMRC gives you by post or in your VAT online account. The period can be very short, even one day. If no VAT is due, you still send the return as a nil return.

Do not wait for every purchase invoice before sending it. You can still claim VAT on invoices that arrive later, as long as the VAT has not already been claimed and you hold proper evidence. Claims cannot cover VAT charged more than 4 years ago.

Source: VAT Notice 700/11: cancelling your registration

VAT on stock and assets over £1,000

When you cancel, you usually make a deemed supply of the goods you still hold. You must account for VAT on stock and other assets you have on the cancellation date if you reclaimed, or could have reclaimed, VAT when you bought them and the total VAT due is over £1,000.

Examples include unsold stock, plant, furniture, commercial vehicles and computers. Value them at what you would expect to pay for them, or similar items, in their present condition.

If all the items are standard-rated at 20%, HMRC's notice explains that no VAT is due if their total value including VAT is £6,000 or less. Above that, VAT is due on all of them on the final return. Keep a list of the assets you held on the cancellation date and their values.

Source: VAT Notice 700/11: cancelling your registration

Common VAT deregistration mistakes

Missing the 30-day window after the company stops trading. Applying for voluntary cancellation when turnover is only low because of a planned break. Cancelling when you should transfer the registration to a buyer. Carrying on issuing VAT invoices after the cancellation date. Forgetting the VAT due on stock and assets in the final return. Holding back the final return while waiting for late supplier invoices.

If turnover later rises again, you must tell HMRC promptly if you need to register again. There are penalties for failing to register at the proper time.

Closing the company too? VAT is only one part of it. Payroll comes first: see how to close a PAYE scheme, then the full order in how to close a limited company.

Source: VAT Notice 700/11: cancelling your registration

Get help cancelling your VAT registration

SimpleFilings can check which cancellation route applies and prepare your VAT cancellation using your answers, for a £4.99 service fee. HMRC does not charge a fee to cancel. HMRC decides the official cancellation date. This service does not prepare your final VAT Return or work out VAT on stock and assets. You will need someone, such as your accountant, to do that.