How to deregister for VAT

Deregistering for VAT in the UK can be a strategic move for businesses. The primary trigger is a sustained drop in turnover below the £85,000 threshold. Early-stage businesses or those experiencing a market decline might find VAT registration unnecessary.

Deregistration isn’t an automatic option. You must meet specific criteria:

• Falling below the VAT threshold: The current VAT threshold in the UK is £85,000. If your expected turnover for the next rolling 12 months falls below this amount, you can apply to deregister.
• Ceasing to be a taxable person: If you’re permanently stopping your business activity or changing your legal structure and no longer require a VAT number, deregistration is necessary.

Methods for Deregistration:

• Online Deregistration: The preferred method is through your Government Gateway account (https://www.gov.uk/register-for-vat/cancel-your-registration). This is a quick and convenient option if you meet the eligibility criteria and have no outstanding VAT payments.
• Deregistration via Post: If online deregistration isn’t available, you can submit form VAT7 by post. You can find and download the form on the GOV.UK website (https://www.gov.uk/register-for-vat/cancel-your-registration). Ensure you complete the form accurately and send it to the address mentioned on the form.

Important Considerations:

• Timeliness: It’s recommended to apply to deregister at least a month before your expected turnover falls below the threshold.
• Outstanding VAT Payments: Any outstanding VAT liabilities must be settled before deregistration is approved.
• Record Keeping: You’re legally required to retain VAT records for a minimum of six years after deregistration.

Additional Points:

• Selling your business: If you’re selling your business as a going concern, and the new owner intends to keep the VAT registration number, deregistration isn’t required. You’ll need to inform HMRC of the change in ownership.
• Changing legal structure: If your business is changing its legal structure (e.g., from a sole trader to a limited company), you might need to deregister and re-register for VAT under the new structure.

Remember: Deregistration has implications beyond simply stopping VAT payments. It impacts how you display prices, handle record-keeping, and interact with HMRC.