VAT Deregistration is a popular area in the Advanced Tax exam.

A VAT registered business can deregister voluntarily if the business expects taxable supplies (standard and zero-rated sales) in the next 12 months to be less than £83,000.

Deregistration will take effect from an agreed date.

The other type of deregistration is compulsory deregistration which occurs on a cessation of trade.

Once a VAT registered business ceases to trade, it must deregister by notifying HMRC within 30 days of the date of cessation.

Deregistration will take effect from the date of cessation.

 The business must pay a final VAT charge based on the market value of inventory and non-current assets like machinery and computers on which input VAT was claimed back earlier.

This final VAT charge is only payable if it is more than £1,000.

At times a cessation of trade occurs due to the sale of a business as a going concern. This is outside the scope of VAT and no final VAT charge is payable as long as all 4 conditions are satisfied.

  1. Going concern
    1. No significant break of trade.
    1. No change of trade
    1. Buyer is VAT registered or becomes VAT registered immediately after the transfer.  

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