One of Right Accounts clients wanted to know, what he should do if his business is VAT registered but the turnover had dropped below the VAT registration threshold. We’re sharing our answer in this blog post and hope that more of our readers will find it useful.

Registering and de-registering for VAT

It’s a legal obligation to register your business for VAT if your VAT taxable turnover is above the certain threshold. The threshold for 2018/2019 tax year is £85,000.

However, if you registered your business with HMRC for VAT and then your turnover fell below the de-registration threshold, which for this year is £83,000, then you must cancel your registration.

Your business might have fallen below the threshold for various reasons, including:

• not making VAT taxable sales
• stop trading
• joining another company for VAT under a single registration number

When and how to cancel?

You must cancel your VAT registration within 30 days when you become no longer eligible for VAT registration. If you fail to do that, you might face a penalty.

To de-register for VAT online – log in to your VAT online account here. To de-register by post – fill in and send VAT7 form.

What happens after de-registering?

• HMRC will normally confirm de-registration of your business as a VAT payer within 3 weeks.
• You will receive a confirmation by HMRC.
• When you de-register, you can no longer charge VAT.
• You must keep your VAT records for 6 years.
• You will have to submit the VAT Return for the time up to and including the de-registration date.
• If you could reclaim VAT when you bought stock and the total VAT on these items is more than £1,000, then you must account for this stock.

What if you made a mistake?

If you canceled your VAT registration by mistake, HMRC will re-register your business again and you’ll have to pay VAT that you’re accounted for.

Transferring VAT registration

In certain cases, you can consider transferring VAT registration from one business to another. For example, if you acquire a company and want to keep using the same VAT number.