In the European Union and OECD, the UK has the highest registration threshold for VAT. As per the government’s research, the threshold of £85,000 implies that about 3.55 million small enterprises avoid VAT registration. In case the annual turnover of the enterprises that are VAT registered falls under the given threshold (£83,000) of deregistration, they are allowed to apply for VAT deregistration.
Continue reading this blog if you want to know about the reasons for this deregistration.
What is VAT Deregistration?
As mentioned above, your enterprise can apply for the deregistration if it falls under the threshold (£83,000) or if you anticipate taxable sales to fall below it.
There can be certain situations where deregistration can be a good option, and it is not always in the interest of an enterprise to remain registered.
Before making any decision, it is important to consider your enterprise, turnover, and surrounding situations. Furthermore, it is wise to consult with a professional in case you are in doubt about the implications of your enterprise.
The Main Reasons for VAT Deregistration
There are two main reasons for enterprises to deregister for VAT.
- When it does not expect the taxable turnover to surpass the threshold (£83,000) of deregistration.
- When it has ceased making the taxable supplies.
However, it is allowable to request for deregistration in the following situations:
- You can assure HM Revenue & Customs that your taxable turnover will not be more than the given threshold of deregistration over the next year.
- You close down a section of your enterprise and can ensure HM Revenue & Customs that your taxable turnover will be below the deregistration threshold for the rest of the year.
There are some circumstances where it is compulsory for an enterprise to deregister if:
- The enterprise has been sold.
- Your enterprise has stopped trading and has no plan for making taxable sales in the future.
- Your enterprise joins a VAT group.
- Your enterprise legal entity changes; for instance, a self-employed person establishes a limited company.
- The agriculture Flat Rate Scheme is joined by a farming enterprise.
How to Cancel your VAT Registration?
You can log into your Value Added Tax online account in order to cancel your VAT registration. After canceling online, HMRC normally takes three weeks to confirm your deregistration.
Benefits & Drawbacks of VAT Deregistration
You should go through these benefits and drawbacks of deregistering before making any decision regarding this.
- VAT receipts are no longer needed to be obtained.
- You are free from updating your account quarterly.
- VAT returns are not required to be submitted.
- It is easy to grasp the attention of more clients by charging less than competitive VAT registered enterprises.
- You can’t claim VAT on purchasing products.
- Large organizations would be less interested in doing business with you because they consider you are too small.
- You will require maintaining records of your earnings every month to ensure you don’t exceed the given VAT registration threshold.
To give final thoughts on the discussion of VAT deregistration, we can say that it is essential to go through the advantages and disadvantages before making any decision. You are only allowed to apply for the deregistration if your income falls below the threshold (£83,000). So, to make sure of this, you have to keep records of your earnings every month, which is complex and time-consuming. That is why we recommend you to take professional help and services regarding deregistration.
For more information on the deregistration of VAT and other business affairs, talk to our VAT professionals! We are friendly & cost-effective accountants that provide the best possible solution to all your business problems! So, contact us right away!
Disclaimer: This blog contains general information about the deregistration of VAT.