Can I Deregister from VAT?
If your business is VAT registered but your circumstances have changed, you may be wondering: “Do I still need to be VAT registered?”
Perhaps your turnover has fallen. Maybe you've stopped trading, changed what your business does, or you registered for VAT voluntarily when your business was smaller.
In some circumstances, you can deregister from VAT, also known as cancelling your VAT registration.
However, you cannot simply stop charging VAT and forget about it. There are steps you need to take with HMRC, and you may need to account for VAT on certain assets or stock when you deregister.
In this guide, we'll explain when you can deregister from VAT, how it works and what you need to do afterwards.
What Does VAT Deregistration Mean?
VAT deregistration means cancelling your VAT registration with HMRC.
Once your VAT registration is cancelled, you generally:
Stop charging VAT on your taxable sales
Stop submitting VAT Returns
Cannot normally reclaim VAT on future business purchases
No longer have a VAT registration number to use on your invoices
The exact date your VAT registration ends is important. You should not simply stop charging VAT because you think your turnover is now below the threshold. HMRC needs to approve or process the cancellation, depending on the circumstances.
Can I Deregister from VAT if My Turnover Has Fallen?
Yes, potentially. If your business is no longer required to be VAT registered because your taxable turnover has fallen below the relevant deregistration threshold, you may be able to request voluntary deregistration.
The current UK VAT registration threshold is £90,000.
The deregistration rules look at whether your taxable turnover is below the relevant deregistration limit, including whether you expect it to remain below the threshold over the following 12 months.
Example
Let's say Sarah runs a consultancy. Her business grew quickly and she registered for VAT when her taxable turnover went above the registration threshold. The following year, she loses a major contract and expects her taxable turnover to remain well below the relevant VAT threshold.
Sarah may be able to apply to cancel her VAT registration. However, she should look at her expected turnover carefully rather than simply cancelling because one month was quiet.
What If I Registered for VAT Voluntarily?
This is an important point. Some businesses register for VAT even when they are below the compulsory registration threshold.
For example, a business might voluntarily register because:
Its customers are mainly VAT-registered businesses
It wants to reclaim VAT on eligible purchases
It wants to appear established to commercial customers
It expects its turnover to grow
If you registered voluntarily and your circumstances have changed, you may be able to cancel your VAT registration if you meet HMRC's requirements.
HMRC's rules allow voluntary deregistration where it is satisfied that the business will remain below the relevant deregistration threshold.
Can I Deregister If I've Stopped Trading?
If you've stopped making taxable supplies, you will generally need to tell HMRC. For example, you might:
Close your business
Stop being self-employed
Retire
Sell your business
Stop making taxable supplies
HMRC says businesses that cease making relevant taxable supplies must notify HMRC within the required period. But there can be complications.
For example, if your business still has stock or business assets that need to be sold, you may still have VAT considerations after you've stopped trading. So don't assume that "I've stopped trading" automatically means there is nothing left to deal with.
What Is the VAT Deregistration Threshold?
This is where things can get confusing.
The VAT registration threshold and deregistration threshold are related, but you should not assume that every VAT situation is the same.
For taxable supplies, the current registration threshold is £90,000. HMRC publishes the current deregistration limits separately in its VAT guidance.
The key point is: Don't make your decision based simply on whether your turnover is below £90,000 today. HMRC considers the relevant rules and your expected taxable turnover.
If you're considering deregistration, it is worth checking the current HMRC guidance or speaking to an accountant before applying.
What Happens to VAT on Your Stock and Assets?
This is one of the areas that can catch businesses out.
When you deregister, you may need to account for VAT on certain goods and assets that your business still holds. For example, imagine a business has:
Stock for resale
Business equipment
Computers
Machinery
Some of these items may have VAT implications when the business deregisters. This means deregistration isn't necessarily as simple as: "My turnover is below the threshold → cancel VAT → done."
You should review your stock and assets before cancelling your registration.
What Happens to Your Final VAT Return?
Deregistering from VAT does not mean you can forget about your final VAT Return. You'll normally need to submit a final VAT Return covering the period up to your cancellation date.
For example:
Your VAT registration ends on 30 September. Your final VAT Return would cover the relevant period up to that date. HMRC's guidance states that where cancellation takes effect from 1 October, 30 September is the last day of registration and the final return period. You should also make sure that any VAT due is paid.
Can I Still Charge VAT After Deregistering?
No. Once your VAT registration has been cancelled, you should not continue issuing VAT invoices. HMRC states that from the effective date of cancellation, a business must not issue VAT invoices. This is particularly important if you have regular customers.
Example
Your VAT registration ends on 1 October. An invoice issued for a taxable supply made after your cancellation date should not simply include 20% VAT because you used to be VAT registered. Make sure your invoicing software and templates are updated when your cancellation takes effect.
What Happens to Your VAT Number?
Once your VAT registration is cancelled, your VAT registration number is no longer valid for charging VAT.
You should therefore remove your VAT number from relevant invoice templates, quotes, websites, order forms, accounting software, and any other customer-facing documents. This helps prevent accidentally charging VAT after deregistration.
Do I Need to Keep My Old VAT Records?
Yes. Deregistering from VAT does not mean you can delete your old VAT records. HMRC says VAT records generally need to be kept for at least six years, including after deregistration.
So if you deregister today, don't immediately delete all your old VAT invoices and records. Keep them safely for the required period.
What About Making Tax Digital?
If your business has been using compatible software for Making Tax Digital for VAT, don't simply switch everything off immediately after deregistration. You'll still need to complete any outstanding VAT obligations, including your final VAT Return. Once your VAT obligations have been completed, you can review your accounting software and make sure your VAT settings are updated.
Is Deregistering from VAT Always a Good Idea?
There isn't one answer for every business.
Deregistering could mean less VAT administration and may make pricing simpler if your customers are mainly individuals who cannot reclaim VAT. But there can also be disadvantages. For example, after deregistration you generally cannot reclaim VAT on future business purchases.
Example
Imagine a business is planning to buy £30,000 of equipment plus VAT. If it remains VAT registered and the purchase qualifies for VAT recovery, the VAT treatment could be very different from buying the equipment after deregistration.
This is why it can be worth considering your future plans, rather than looking only at your current turnover.
What About Sole Traders?
Sole traders can deregister from VAT if they meet the relevant conditions.
For example, you may have registered when your business grew but later reduced your workload. Perhaps you're:
Working fewer days
Taking on fewer clients
Moving towards retirement
Closing part of your business
No longer expecting your turnover to reach the relevant threshold
Don't forget that deregistration is separate from your Self Assessment responsibilities. Cancelling VAT does not mean you've stopped being self-employed or that you no longer need to file a Self Assessment tax return.
What About Landlords?
VAT and property can be particularly complicated. A residential landlord will generally have different VAT considerations from a commercial property landlord.
If you are VAT registered because of a property business, don't assume that falling rental income automatically means you can cancel your VAT registration. You should consider:
The type of property
Whether the rental income is taxable
Whether you have opted to tax a property
Property sales
Property-related expenses
Your expected future turnover
Property VAT can have significant consequences, so professional advice can be particularly useful before making changes.
How Do I Cancel My VAT Registration?
The process depends on why you're cancelling your VAT registration.
HMRC provides guidance on cancelling a VAT registration and explains the difference between compulsory and voluntary cancellation.
In general, you'll need to:
1. Check that you are eligible
Make sure you meet the conditions for cancelling your registration.
2. Apply to HMRC
Submit the cancellation request using the appropriate HMRC process.
3. Establish your cancellation date
Your effective cancellation date matters because it determines when you stop charging VAT and the period covered by your final VAT Return.
4. Complete your final VAT Return
Include the relevant transactions up to your cancellation date and deal with any VAT due.
5. Update your invoicing and accounting software
Remove your VAT details when appropriate and make sure future invoices don't incorrectly charge VAT.
6. Keep your VAT records
Don't throw away your old VAT records just because your registration has ended.
Common VAT Deregistration Mistakes
Here are some mistakes worth avoiding.
Deregistering because one month's turnover is low
VAT deregistration isn't based simply on one quiet month. You need to consider the relevant turnover and HMRC rules.
Forgetting about stock and assets
There may be VAT consequences for goods and assets held by the business.
Charging VAT after cancellation
Once your registration has ended, you generally cannot continue charging VAT.
Forgetting the final VAT Return
Deregistration doesn't automatically deal with your final VAT obligations.
Deleting old VAT records
You still need to retain your records for the required period.
Deregistering just before a large purchase
If you're planning a major purchase, consider the VAT implications before cancelling your registration.
Before You Deregister: A Simple Checklist
Before making the decision, ask yourself:
Has my taxable turnover fallen below the relevant threshold?
What do I expect my turnover to be over the next 12 months?
Am I still making taxable supplies?
Have I stopped trading?
Do I have stock?
Do I have valuable business assets?
Am I planning any large purchases?
Do I have property transactions to consider?
Which VAT scheme am I using?
Have I considered the effect on my customers?
Will I need to submit a final VAT Return?
Have I planned how I'll keep my old VAT records?
If you're unsure about any of these, it's worth getting advice before submitting the cancellation request.
Frequently Asked Questions
Can I deregister from VAT if my turnover is below £90,000?
Potentially, yes. But being below £90,000 today does not automatically mean you should or can cancel your VAT registration. HMRC's deregistration rules also consider expected taxable turnover and the circumstances of the business.
Can I voluntarily deregister from VAT?
Yes, provided you meet the conditions for voluntary cancellation. This can apply to businesses that are no longer required to be registered but remain below the relevant deregistration threshold.
Do I still need to submit a VAT Return after deregistering?
You normally need to submit a final VAT Return covering the period up to your effective cancellation date.
Can I charge VAT after deregistration?
No. Once your VAT registration has been cancelled, you must not continue issuing VAT invoices.
How long do I need to keep my VAT records after deregistering?
Generally, VAT records need to be kept for at least six years, even after you have deregistered.
Can I register for VAT again in the future?
Your VAT position can change if your circumstances change. If you become liable to register again, you would need to follow the relevant VAT registration rules.
Final Thoughts
Deregistering from VAT can make sense for some businesses, particularly where turnover has fallen or the business has stopped making taxable supplies. But it isn't something you should do simply because your turnover has dropped for a few months.
Before cancelling your VAT registration, look at your current turnover, expected future turnover, customers, assets, stock and upcoming purchases. And don't forget the practical steps: your final VAT Return, invoices, accounting software and record keeping all need attention.
At DUO Accountants, we believe VAT shouldn't feel like a guessing game. If you're wondering whether you can deregister from VAT or you're unsure what it could mean for your business, we're happy to help you understand the numbers and the process in plain English.
Sometimes the best time to ask about VAT is before you make the change.
