Small businesses may be wondering if the trading impact of the Coronavirus means now would be a good time to deregister from VAT.
A business can deregister if it expects taxable sales in the next 12 months to be less than £83,000.
However, HMRC will not allow you to cancel your registration if the reduction in your turnover is the result of your intention to stop trading or suspend making taxable supplies for 30 days or more in the next 12 months.
With all VAT deregistration situations, there is a need to account for output tax on stock and fixed assets owned by the business at the time of deregistration.
Output tax is based on the market value of the items but there is a de-minimis threshold if the total VAT payable on all stock and assets is less than £1,000. There are certain exclusions that will reduce the liability.
In addition to which, if a business owns property on which it paid VAT there could be additional issues with deregistration.
We know it may be tempting to consider deregistering, and possibly save VAT during this difficult period, but in most cases it would be best to remain in the VAT club.
If you would like to discuss, please contact a member of our team, or email [email protected]