What is VAT deregistration and what are the invoice implications?
VAT deregistration is the process of removing a business from the VAT register, either voluntarily (if taxable turnover falls below the deregistration threshold) or compulsorily (if the business ceases trading). After deregistration, the business must stop charging VAT on its supplies and stop issuing VAT invoices. Outstanding input VAT recovery rights cease, and the business must account for a final VAT return covering the period to the deregistration date.
What is the process for VAT deregistration?
UK VAT deregistration process: (1) Notify HMRC when taxable turnover falls below the deregistration threshold (GBP 83,000 as of 2024) or when the business ceases trading; (2) Apply via HMRC online services (VAT7 form); (3) Continue to issue normal VAT invoices until the deregistration date confirmed by HMRC; (4) After deregistration date: stop charging VAT and stop issuing VAT invoices; (5) Submit a final VAT return covering the period to the deregistration date; (6) Account for VAT on any assets (stock, equipment) held at deregistration if the pre-registration input VAT was recovered (VAT on deemed supply of assets).
Frequently Asked Questions
- What happens to outstanding invoices when a business deregisters for VAT?
- Invoices issued before the deregistration date remain valid VAT invoices; buyers can still recover input VAT on them. Invoices issued after the deregistration date must not include VAT; if the business incorrectly charges VAT after deregistration, it must still pay the incorrectly charged VAT to HMRC (Section 73 assessment) but the buyer cannot recover it as input tax. Outstanding purchase invoices received after deregistration cannot generate new input VAT recovery claims.
- Can a business re-register for VAT after deregistering?
- Yes. A business that deregisters can re-register for VAT if it subsequently meets the registration threshold. The re-registration is treated as a new registration with a new VAT number. The previous VAT number is cancelled and must not be used after the deregistration date. If re-registering, the business must check whether pre-registration input VAT can be recovered (HMRC allows recovery of input VAT incurred on stock and assets still on hand at re-registration, subject to time limits and conditions).