Likely outcome to late deregistartion

[Kitty Kat]

A client was transfered via a ToGC. The VAT7 has been overlooked, and it has now been over 3 months since the transfer, will HMRC impose any penalty for this late deregistration? No invoices have been raised or received since the transfer, though amounts have been paid and received in respect of pre-transfer debts.

I see mixed answers, some say it is just a stick HMRC could use but never do (like the reducing POA penalty), others say the client will be hit with the stick.

[les35]

The penalty falls under the Regulatory Penalties. The penalty rate is £5 per day, up to a maximum of £500, as long as there had been no default in the preceding two years.
Frankly, the penalty is not always applied. You will need to submit the VAT7, and see how they respond.

[Kitty Kat]

The penalty falls under the Regulatory Penalties. The penalty rate is £5 per day, up to a maximum of £500, as long as there had been no default in the preceding two years.
Frankly, the penalty is not always applied. You will need to submit the VAT7, and see how they respond.

Ok, we'll see how it goes!

[Generix]

A client was transfered via a ToGC. The VAT7 has been overlooked, and it has now been over 3 months since the transfer, will HMRC impose any penalty for this late deregistration? No invoices have been raised or received since the transfer, though amounts have been paid and received in respect of pre-transfer debts.

I see mixed answers, some say it is just a stick HMRC could use but never do (like the reducing POA penalty), others say the client will be hit with the stick.

Erm...did the client continue to submit VAT returns? At best one must be due now/soon?

[Generix]

Am I missing something as I didn't think there was a compulsory requirement to deregister for VAT following a TOGC. You are transfering the business (or part of the business) not the entity. Therefore the remaining entity could remain VAT registered on a voluntary basis assuming it had an intention to make taxable supplies at some point?

Or is my knowledge of TOGCs not what I thought it was

[les35]

If the TOGC meant that the business ceased, which the original question implied, then, unless the VAT number was retained (it usually isn't) the previous business needs to deregister using a VAT7.
The question about outstanding VAT Returns should also be answered. A VAT7 normally triggers a final VAT return, until the agreed deregistration date.

[Generix]

If the TOGC meant that the business ceased, which the original question implied, then, unless the VAT number was retained (it usually isn't) the previous business needs to deregister using a VAT7.
The question about outstanding VAT Returns should also be answered. A VAT7 normally triggers a final VAT return, until the agreed deregistration date.

I can't be bothered looking at the law as its a Friday, but does the requirement to deregister arise from somehting in the TOGC regs or just because the trader will no longer have an intention to make taxable supplies?

[Kitty Kat]

There's a specific box on the VAT7 for ToGC cases, so I assume the ToGC itself causes the deregistration.

[Generix]

There's a specific box on the VAT7 for ToGC cases, so I assume the ToGC itself causes the deregistration.

Had a skim over Sch1 and couldn't see the offending item (specific to TOGC) don't think Sch1 would be overridden elsewhere by togc regs.

I would say chances of fine/penalty/interest is next to nil for being a little late on deregistration.

If VAT returns haven't been submitted in the interim then fines are more likely.

Part on form is likely so they can match up new reg's with deregs to make sure none have slipped the net so to speak. They would obviously be more worried about the reg's than dereg's).

[spidersong]

I ran a HMRC deregistration team covering 3 counties for a couple of years, and I can count on the fingers of one mitten the number of times I remember threatening a penalty for late notification of a deregistration. The threat was only made because of various other problems with the trader and wasn't really a direct result of the deregistration any way.

On the registration side they were more frequent for people not notifying changes of address etc. that did actually cause compliance problems.

It seems there's no loss to the revenue, and if the trade hasn't continued then there's no future compliance reason to issue a penalty, so even if policy has changed quite radically since I left I'd still be rather surprised to see a penalty issued in these circumstances.

And as others have pointed out the trader can only be in default if they had no right to be registered, so if there was any intention or possibility that any form of trade may continue, then the client has a right to be registered and hence no requirement to submit a dereg form and that means no failure to notify.

So I'd be assuming, and arguing to HMRC if necessary, that the client has only now firmly decided not to continue any taxable trade and only now has a requirement to deregister.