VAT Deregistration

If you close your business down and deregister for VAT, you make a deemed supply of the goods you have on hand.  This means you may have to account for VAT on some of your business assets and stock on hand, on your final VAT return.  This applies only if the VAT due would be £1,000 or more.

You must include any tangible goods, for example stock, plant and machinery, commercial vehicles, if you claimed input VAT when you originally purchased them.

You do not include intangible goods, such as patents, goodwill and copyrights.

If you took over a business which was transferred as a going concern and the goods were VAT free at the time of transfer you must still account for VAT on them.

However, remember that you do not need to account for VAT on any item which you did not claim VAT on when you bought it.  For example if you bought goods from a private individual or an item bought under the VAT Margin Scheme.

Different regulations apply to land or buildings dependent on whether you paid VAT on the purchase and whether you will retain the land or property after deregistration.

If your business will continue as it is being transferred as a going concern or you are changing its legal entity you do not need to account for VAT on the assets, if the new owner is registered for VAT.  If the new owner is not registered for VAT however, you must account for VAT on the assets on hand in the usual way.

Once you have calculated the estimated value, this should be entered on the “Application to Cancel the VAT Registration” form, VAT7.

If HMRC accept your application to cancel, a final VAT return will be due, which should include the deemed supply VAT.  This should be adjusted, by increasing your Output VAT figure. Remember though, that this is only if the VAT due will exceed £1,000.

Gail Kristiansen | gail.kristiansen@renniewelch.co.uk