Find out how to deregister for VAT in the guide, including the HMRC form (VAT7) that you need to complete either online or by post as well as how to choose the right time to cancel a VAT registration.
Updated 6 August 2021
Table of contents
1. When to Deregister for VAT
A business can deregister for VAT once VAT taxable turnover falls below £83,000. Cancelling a VAT registration may not always be suitable especially if a business is only experiencing a temporary drop in turnover because the process is irreversible. That means if taxable turnover increases and goes over the VAT threshold, the business will be required to register for VAT again and get a new VAT number because you cannot reinstate an old VAT number.
Cancelling a VAT registration may be useful if the business sells zero-rated supplies and wants to apply for a VAT exemption to avoid the responsibility for filling in VAT returns.
2. How to Deregister for VAT Online
Deregistering online is easy. Login to your .GOV tax account and select the option to ‘Deregister for VAT’ on the right-hand side
Alternatively if presented with the screen below choose to ‘Change Registration Details’ on the left hand.
3. How to Deregister for VAT by Post (VAT7 Form)
To cancel your VAT registration by post, you’ll need to complete a VAT7 form. You’ll need to complete the form online, then print it and post it back to HMRC using the address enclosed at the end of the form.
4. Selecting a Date for VAT Deregistation
Whether you cancel online or by post, you’ll need to choose a date you want to stop accounting for VAT. You cannot backdate your deregistration, the date you choose can either be the date you submit your form or a point in the future, but the date you choose could save you money on your final VAT return or stop you from ending up with a VAT bill to pay. When it comes to choosing a date to cancel your VAT registration you should check the following:
- Upcoming purchases;
- Stock levels;
- Fixed assets.
4.1 Upcoming Purchases
Once you have cancelled your VAT number you’ll no longer be able to claim back VAT on expenses. Check what expenses you have coming up to help you decide when the right time is for deregistering and whether you want to claim these expenses on your final VAT return.
4.2 Stock Levels
As part of your final VAT
Mark sells computer equipment on eBay but his business turnover has declined so he has decided to cancel his VAT registration. He chooses a deregistration date of 1 May 2021.
At this date, he has stock of computer equipment with a market value of £6,500 excluding VAT. On his final VAT return to 1 October 2020, Mark will need to pay VAT on these goods of £1,300 (£6,500 x 20%). He needs to repay this to HMRC since he intends to sell the computers after he deregisters so need to pay back a portion of the VAT he claimed on buying the stock. If Mark wants to avoid paying this to HMRC he can wait until he sells some of his stock to bring him to below the stock limit of £5,000 market value.
4.3 Fixed Asset
If the market value of fixed assets is more than £1,000 then you’ll need to pay 20% of this amount over to HMRC on the final VAT return.
Don’t forget to keep all the paperwork to back up your calculations and workings for how you worked out the market value of your stock or assets – in the event of an inspection you would be asked to present these.
5. What Happens Once a VAT Number is Cancelled
Once you have submitted your application form, it can take HMRC up to 3 weeks to approve your request to cancel your VAT number. Once agreed by HMRC you will ask you to complete a final VAT return to the date your vat number is cancelled, so this may be less than a quarter depending on the date you have selected. Your final VAT return will appear online when it is ready, marked as FINAL. You must continue to account for VAT as normal up until the date that your deregistration takes place.
6. How to Deregister for VAT Under the Flat Rate Scheme
Where a business deregisters for VAT registration and it is also using the flat rate scheme, there will be two dates leaving dates – one for the flat rate scheme and another for the main VAT registration. The business will leave the flat rate scheme one day before it deregisters fully for VAT. It must prepare all outstanding sales invoices before leaving the flat rate scheme.
On the final day, the business will operate under the rules of standard VAT. That means it can claim VAT on expenses on this date which can be beneficial for the business because it can claim back VAT on expenses on this day.
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