Cancelling Your VAT Registration

Cancelling your VAT registration involves more than simply notifying HMRC — you must settle outstanding VAT issues, deal with any remaining stock or assets, and understand your obligations after deregistration. Getting this process right will help you avoid unexpected tax bills and comply with HMRC's requirements.

When you can cancel your VAT registration

You can cancel (or 'deregister from') your VAT registration when your business stops trading, your taxable turnover falls below the deregistration threshold, or you're no longer making taxable supplies. Before you deregister, you must resolve any outstanding VAT matters relating to the period when you were registered.

Reclaiming VAT after cancellation

Even after cancelling your VAT registration, you can reclaim VAT in certain situations:

Goods or services supplied while VAT registered: If you received goods or services during your VAT-registered period but didn't include the VAT in a previous VAT return, you can still reclaim it.

Post-cancellation services: You can reclaim VAT on services supplied after your registration was cancelled if they relate to taxable activities from when you were registered — for example, accountancy fees for work done during your VAT-registered period.

Bad debts: You can claim VAT relief on bad debts from goods or services supplied when the business was VAT registered. You must claim within 4 years and 6 months from the end of the accounting period when the business became entitled to VAT relief on the bad debt.

HMRC may check the amount you claim before making any payment. If you're due a repayment, HMRC aims to process this within 30 working days.

When you owe VAT after deregistration

You may need to pay VAT to HMRC after cancelling your registration in these circumstances:

Goods sold to satisfy a debt: If goods were sold when the business was VAT registered to pay off business debts, VAT is due on those sales.

Credit notes for post-cancellation services: If a credit note shows that VAT is due for services supplied after your VAT registration was cancelled, you must pay this to HMRC.

You must make any VAT payment within 21 days of the sale of the goods.

VAT on stock and assets (input tax relief)

If you hold stock or assets on which you reclaimed VAT when you purchased them, you may need to repay some of that VAT when you deregister. This is known as input tax adjustment. The opposite can also apply — if you didn't reclaim all the VAT you were entitled to, you can claim relief on cancellation.

To deal with input tax relief on cancellation of registration, you'll need to complete form VAT427. Get all your information together before starting, as you fill in this form online and cannot save your progress. Once completed, print and post it to HMRC using the postal address shown on the form.

For help with form VAT427, contact the VAT427 team on 03000 583936.

Special considerations for insolvency

If your business is insolvent, a different process applies. Insolvency practitioners should use form VAT426 to reclaim input tax after deregistration. Like form VAT427, this must be filled in online in one session, then printed and posted to HMRC.

For help with form VAT426, contact the VAT426 team on 0300 3229209.

Properties with an option to tax

If you've opted to charge VAT on land or buildings (known as an 'option to tax'), you must tell HMRC about this as part of cancelling your VAT registration, as it could affect your final tax liability.

You must submit information about any properties on which you held an option to tax, including those you've already disposed of and any options that have been excluded or disapplied.

If you've disposed of opted properties: Make sure you applied the correct VAT treatment to those sales before cancelling your registration. If VAT is due, declare it on the appropriate VAT return.

If you still own opted properties: Be aware that VAT may still become chargeable if you make further supplies of an interest in the property after deregistration, or dispose of the property later without having revoked the option to tax.

For each opted property, you'll need to provide:

• Property address
• Land registry title number (if known)
• Date the property was purchased
• Details of the previous owner, including their VAT registration number (if known)
• If sold, the date disposed of, sale price, and purchaser's VAT registration number
• Date any option to tax was revoked (if applicable)

If you have 5 or more properties to report, you can use a template in the online service to submit all the information at once.

How to notify HMRC

To reclaim VAT or tell HMRC that VAT is due after cancelling your registration, use the online service. You'll need your Government Gateway user ID and password. If you don't have one, you can create it when you first sign in. Insolvency practitioners should sign in using their email address.

You'll need the following information:

• Company name
• VAT registration number (or VAT group registration number if part of a VAT group)
• Date the business cancelled VAT registration
• For each claim: description of the goods, services, or bad debt; supplier or debtor name (if reclaiming); invoice date; and the invoice showing the VAT amount

You may be asked for original invoices to verify your claim.

If you're reporting both amounts due and amounts to reclaim, HMRC will offset one against the other.

Making payment to HMRC

If you owe VAT after deregistration, you must pay within 21 days of the sale of the goods. When making payment, use the reference number starting with CAT2V833 followed by your VAT registration number (for example, CAT2V833123456789).

From a UK bank account, use these details:

• Sort code: 08-32-00
• Account number: 12000903
• Account name: Indirect Miscellaneous Account

From an overseas bank account, use:

• IBAN: GB20 BARC 2005 1730 3364 91
• BIC: BARCGB22
• Account name: Indirect Miscellaneous Account

Make overseas payments in pounds sterling (GBP) — your bank may charge you if you use any other currency.

Sources

• Pay VAT to HMRC after cancelling your VAT registration
• Reclaim or tell HMRC VAT is due when VAT registration is cancelled
• Tell HMRC about an option to tax on property as part of cancelling your VAT registration

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.