Cancel your VAT registration

If you're closing your business, selling it, or your turnover has fallen below the deregistration threshold, you may need to cancel your VAT registration. You must notify HMRC within 30 days of the circumstances requiring cancellation.

Getting deregistration wrong can result in penalties and unexpected VAT bills. This guide explains when you must deregister, how to handle your final return, and what happens to VAT on stock and assets you keep.

When you can or must deregister

You can apply to cancel your VAT registration if your taxable turnover has fallen below the deregistration threshold, or you must cancel if you''re no longer making taxable supplies.

VAT deregistration thresholds

Current VAT deregistration threshold and comparison with registration threshold.

Deregistration threshold: £88,000 per year (from 1 April 2024)
Registration threshold: £90,000 per year (from 1 April 2024)
Threshold purpose: Deregistration set below registration to prevent businesses trading around the threshold from constantly registering and deregistering
Northern Ireland EU acquisitions: £90,000 threshold applies to both registration and deregistration

The UK has the highest VAT registration threshold in the OECD. An estimated 3.2 million small UK businesses are kept outside VAT registration requirements.

THRESHOLD £88,000

turnover threshold: £88,000

You can apply to cancel your VAT registration if you expect your taxable turnover in the next 12 months to fall below £88,000.

This is different from the registration threshold (£90,000). The gap prevents businesses from repeatedly registering and deregistering.

Above threshold:

If your turnover is between £88,000 and £90,000, you remain registered but can apply to deregister if you expect it to stay below £88,000.

Below threshold:

You can apply to deregister. HMRC will consider whether your turnover is likely to stay below the threshold.

Strategic considerations: Consider whether staying VAT-registered benefits you. If most customers are VAT-registered businesses, voluntary registration lets you reclaim input VAT. Deregistering means you can no longer reclaim VAT on purchases.

Compliance timeline: Apply within 30 days of becoming eligible to deregister

Voluntary deregistration

You can apply to deregister if you expect your taxable turnover in the next 12 months to be below the deregistration threshold. HMRC may refuse if they believe you will exceed the threshold.

Compulsory deregistration

You must cancel your registration if you:

Stop making taxable supplies entirely
Sell your business (unless using Transfer of Going Concern rules)
Change to a different legal entity
Join a VAT group

Continue charging and accounting for VAT until HMRC confirms your cancellation. Do not stop collecting VAT early.

Notification deadlines

Missing the notification deadline can result in daily penalties. You must notify HMRC promptly when circumstances change.

VAT deregistration notification requirements

Deadlines and circumstances requiring notification to HMRC to cancel VAT registration.

Notification deadline: Within 30 days of circumstances requiring cancellation
Cease trading: Must notify within 30 days of stopping taxable supplies
Sell business as going concern: Must notify within 30 days of transfer date (Form VAT68 can transfer registration to buyer)
Change legal entity: Must notify within 30 days (old entity deregisters; new entity may need to register)
Join VAT group: Must notify within 30 days of joining (only one VAT registration for entire group)
HMRC processing time: Typically 3 weeks; allow up to 40 working days

Continue charging and accounting for VAT until HMRC confirms cancellation. Do not contact HMRC about your application before 40 working days to avoid delays.

How to apply for cancellation

You can cancel your VAT registration online through your VAT online account. You will need:

Your VAT registration number
The date you want the cancellation to take effect
Reason for cancelling
Details of any stock and assets you are keeping

HMRC typically processes applications within 3 weeks, but allow up to 40 working days before chasing. Contacting HMRC earlier may delay processing.

Your final VAT return

You must submit a final VAT return covering the period up to your cancellation date, even if you owe no VAT.

Final VAT return requirements

Deadlines and requirements for submitting the final VAT return after deregistration.

Standard deadline: 1 month and 7 days after effective date of cancellation
Cash Accounting Scheme deadline: 2 months after effective date of cancellation
Final return scope: Covers period up to and including effective date of cancellation
Nil returns: Must submit even if no VAT is owed
Late invoices: Claim input VAT on invoices received after final return using Form VAT7a

Include all outstanding VAT for the final period. Include VAT on stock and assets if the threshold is exceeded. Do not delay waiting for all invoices - late claims can be made on Form VAT7a.

What to include in your final return

Your final return must include:

All output VAT from your final trading period
All input VAT you are entitled to reclaim
VAT on stock and assets if above the threshold (see below)

If you receive invoices after submitting your final return, you can claim input VAT using Form VAT7a.

VAT on stock and assets you keep

If you are keeping stock or business assets on which you claimed input VAT, you may need to account for VAT on these items in your final return.

VAT on stock and assets at deregistration

Rules for accounting for VAT on business stock and assets retained at deregistration.

De minimis threshold: £1,000 VAT (approximately £5,000 goods value at 20% rate)
Threshold rule: If total VAT on all stock and assets is £1,000 or less, no VAT is due
Above threshold: VAT is payable on ALL relevant stock and assets, not just the amount above £1,000
Valuation method: Current market value at date of deregistration (not original purchase price)

Must include in valuation

Stock on hand where input VAT was claimed on purchase
Business equipment and machinery where input VAT was claimed
Land and buildings where option to tax exercised and input VAT claimed
Goods acquired as part of a Transfer of Going Concern

Can exclude from valuation

Items where no input VAT was claimed at purchase
Cars (except taxis or hire cars with specifically claimed input VAT)
Goods purchased under margin schemes
Intangible assets (patents, trademarks, goodwill, copyrights)
Zero-rated and exempt goods

Transfer of Going Concern: No VAT due on assets if selling to VAT-registered buyer as TOGC
Agricultural Flat Rate Scheme: No VAT on assets if joining the AFRS

VAT Notice 700/11 - Cancelling your registration

Calculating whether you owe VAT

Work through these steps:

List all items: Identify all stock and assets where you claimed input VAT on purchase
Value at market rate: Use current market value, not what you paid
Calculate total VAT: Apply 20% to the total value
Check threshold: If total VAT is over £1,000, you must pay it; if £1,000 or less, nothing is due

Example: You have stock and equipment worth £6,000 at market value. VAT at 20% is £1,200. This exceeds £1,000, so you must include £1,200 in your final return.

Transfer of Going Concern: If you sell your business to a VAT-registered buyer as a going concern, no VAT is due on the assets transferred.

Penalties for late notification

If you fail to notify HMRC within 30 days when you should have deregistered, you may face daily penalties.

VAT deregistration failure to notify penalties

Penalty rates for failing to notify HMRC of circumstances requiring VAT cancellation.

First offence: £5 per day (no previous failures within 2 years)
Second offence: £10 per day (one prior failure within 2 years)
Third or more offences: £15 per day (multiple prior failures within 2 years)
Maximum penalty period: 100 days
Minimum penalty: £50
Reasonable excuse: No penalty if reasonable excuse for failure can be demonstrated

Penalties are assessed under Section 69 of the Value Added Tax Act 1994. In practice, penalties are typically only assessed if VAT was lost due to failure to notify. Appeal deadline is 30 days from the penalty notification letter.

Avoiding penalties

You can avoid penalties by:

Notifying HMRC as soon as circumstances change, even if exact dates are uncertain
Keeping evidence of when you stopped trading or became eligible to deregister
Demonstrating reasonable excuse if you do notify late

In practice, HMRC typically only assesses penalties if VAT was lost due to your failure to notify.

Records you must keep

After deregistering, you must retain your VAT records for at least 6 years.

VAT record keeping after deregistration

Retention periods and requirements for VAT records after cancelling registration.

Standard retention period: 6 years after deregistration
OSS/MOSS scheme users: 10 years retention required
Shorter period available: Apply in writing to HMRC National Advice Service if 6-year rule causes serious storage problems

Records to keep

VAT account (summary of VAT owed and claimed)
All VAT invoices issued and received
All VAT returns submitted
Records of all taxable supplies
Records of all purchases and expenses
Import and export documentation
Credit notes and debit notes

Specific to deregistration

List of all business assets on hand at cancellation date with individual values
Calculation of stock and assets threshold
Final VAT return and supporting documentation
Correspondence with HMRC regarding cancellation

Record keeping for VAT (Notice 700/21)

Why record keeping matters after deregistration

HMRC can open enquiries into your VAT affairs for up to 6 years after deregistration. Good records protect you by:

Proving you correctly calculated VAT on stock and assets
Supporting input VAT claims you made
Demonstrating you notified HMRC within the required deadline

If 6 years' retention causes serious storage problems, you can apply to HMRC for permission to destroy records earlier.

After deregistration

Once HMRC confirms your cancellation:

Stop charging VAT on invoices immediately
Update your invoices and price lists to remove VAT
You can no longer reclaim VAT on purchases
Keep your VAT records for 6 years

If you later exceed the registration threshold again, you will need to re-register for VAT.

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Cancel your VAT registration

When you can or must deregister

VAT deregistration threshold 2025/26

Above threshold:

Below threshold:

Voluntary deregistration

Compulsory deregistration

Notification deadlines

How to apply for cancellation

Your final VAT return

What to include in your final return

VAT on stock and assets you keep

Calculating whether you owe VAT

Penalties for late notification

Avoiding penalties

Records you must keep

Why record keeping matters after deregistration

After deregistration

Compliance Assistant

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When you can or must deregister

VAT deregistration threshold 2025/26

Above threshold:

Below threshold:

Voluntary deregistration

Compulsory deregistration

Notification deadlines

How to apply for cancellation

Your final VAT return

What to include in your final return

VAT on stock and assets you keep

Calculating whether you owe VAT

Penalties for late notification

Avoiding penalties

Records you must keep

Why record keeping matters after deregistration

After deregistration

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Business Context Testing

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