Q. How do I deregister my business for VAT?

A. VAT thresholds are the subject of much speculation as the Government is concerned that many business owners are deliberately choosing to remain below the VAT registration threshold.

Whilst limiting your turnover in this way might seem counter-intuitive (surely you want your business to get as big as possible?) it can make sense if you’re seeking to make a comfortable living rather than get rich.

If the turnover of your business is predicted to fall below £83,000 over the next year, it can deregister for VAT. This is knows as voluntary deregistration. A voluntary deregistration for VAT can take effect from a current or future date.

If you fail to specify a date, the deregistration will take effect from the date HMRC receives the application to deregister, or a later date as agreed with HMRC. You can’t backdate deregistration, even if you have made a mistake in registering for VAT, or you could have applied to deregister earlier but did not for whatever reason.

You would also need to deregister from paying VAT if your business ceased to trade. This is known as compulsory deregistration. If your business has stopped trading and will not make future taxable sales, it must deregister from VAT with effect from the final day of trading.

There is scope, though, to extend this date and thereby capture some final purchase invoices for the purposes of reclaiming input VAT. It’s almost certain that there would be professional fees to or other expenses to pay, which arrive after a business makes its last sale.

Nicola Roby