Businesses that expect their turnover to be below the VAT de-registration limit of £83,000 in the next twelve months can apply to cancel their VAT registration.

HMRC will require evidence of why your turnover will be below the limit, such as loss of contracts, reduced opening hours, or restructuring of the business.

Further details on de-registering, along-with answers to some frequently asked questions are outlined below.

What if my premises have been or are expected to be closed due to Covid restrictions?

  • HMRC will not allow you to cancel your VAT registration if the reduction in turnover is due to you stopping or suspending trading for 30 days or more in any twelve month period; and
  • This means that those businesses who expect their turnover to be below the £83,000 limit, due to Covid restrictions effectively closing their business, will not be able to apply.

What if I haven’t closed my premises?

  • If you have not closed your business premises, or do not have any because, for example, you are a consultant working from home, you will still be able to apply.

How do I calculate my future turnover?

  • Turnover should be calculated on a VAT exclusive basis. If this is below £83,000 you can apply to de-register; and
  • If you are a retailer, HMRC will require you to confirm that you will reduce your prices by the VAT element.

What date will my registration be cancelled from?

  • HMRC will only allow you to cancel your registration from a current or future date.  The earliest date that can be applied is the date that HMRC receive the application to de-register.

VAT may be due on stock, assets, and opted land and properties

  • When you cancel your VAT registration, VAT is due on any stocks and assets on hand on which you previously claimed, or could have claimed, VAT;
  • No formal valuation is required, and these should be valued at the price you would expect to pay for them in their current condition;
  • There is a waiver limit, and if the VAT that would be due is £1,000 or less, then HMRC will waive it in full, if it is £1,001 then you pay £1,001;
  • If you have land or property that you have opted to tax, and you claimed VAT on it when you bought it, then you will make a deemed supply when you cancel your VAT registration and VAT will be payable based on its current market value;
  • If you have land and property that you have opted to tax, and you did not claim VAT on it when you bought it, then VAT is not due on this when you cancel your registration;
  • Your option to tax, however, will remain in place for its lifetime, a minimum of 20 years, and you will have to charge VAT if you dispose of the land or property in the future;
  • You would need to re-register for VAT in order to account for this;
  • If you have a Capital Goods Scheme item a final adjustment will be required, which may require you to pay additional VAT; and
  • For any remaining complete intervals in the adjustment period, the capital item is treated as being used, taxable (at 100%) if the sale would be a taxable supply and exempt (0%) if the sale would be an exempt supply.

What if my turnover rises in the future?

  • If you do cancel your VAT registration on the turnover basis, and continue to trade, you should monitor your taxable turnover on a rolling twelve month basis;
  • Taxable turnover is sales that are subject to VAT at 20%, 5%, or 0%, it does not include exempt supplies;
  • If your taxable turnover in any 12 month period exceeds the VAT registration limit of (currently) £85,000, you must notify HMRC of your liability to register within 30 days;
  • You must also notify HMRC if at any time you expect your taxable turnover to exceed £85,000 in the next 30 days; and
  • There are penalties for failing to register, or notify a liability to register, within the time limits.

Are you interested in cancelling your VAT registration due to reduced turnover?

Should you have any queries on the above or require any help or support in cancelling your VAT registration then please either get in touch with your usual M+A Partners contact or email and we will be happy to help.

Written by

Our Team