When you must (or can) deregister
- Compulsory: you stop trading, stop making taxable supplies, or the company becomes dormant — you must cancel
- Voluntary: your taxable turnover falls below £88,000 and you expect it to stay there — you may choose to cancel
You tell HMRC, usually online, and they confirm the cancellation date.
The final return and the deemed-supply trap
You file a final VAT return up to the cancellation date. Crucially, on deregistration there’s a deemed supply: you may have to account for VAT on business stock and assets you still hold on which you originally reclaimed VAT — if the VAT due on them exceeds £1,000. It catches people who deregister still owning vans, equipment or stock they’d reclaimed VAT on.
Should you deregister?
It comes down to your customers:
- Selling to the public (B2C): deregistering makes you 20% cheaper or improves your margin — often worthwhile if you’ve dropped below the threshold
- Selling to VAT-registered businesses (B2B): your VAT costs them nothing, but deregistering means you can no longer reclaim VAT on your costs — staying registered may be better
Deregistering as part of winding down
Cancelling VAT is a standard step when a company stops trading, is made dormant or is being closed. Getting the timing and the final return right — including any deemed-supply VAT — avoids a nasty final bill. We handle it as part of the wind-down. Call 0114 327 1480.