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VAT De-registration questions

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Postby dippy » Tue Nov 29, 2005 2:57 am

Two issues that I need advice on;

Firstly, is VAT de-registration as easy and simple as it seems to indicate in HMRC booklets?
I have a business which has been VAT registered for 4 years. Sales are made up of a mix of 2nd-hand vehicles and spare parts. For various reasons, I have decided to stop selling 2nd-hand vehicles and only continue selling spares.
Turnover for 2005 remains over the VAT threshold based on selling off the existing stock of 2nd-hand vehicles. However sales of spares for 2005 is only approx £45k. Without further purchases of 2nd-hand vehicles, the forecast turnover for 2006 is also expected to be £45k. (well under the current VAT de-registration threshold). Does it sound reasonable to de-register based on this forecasted turnover (my year end is 31/12) and if so am I likely to have any problems/comeback from HMRC?

One final issue, I have always estimated stock levels for spares for my annual accounts. When I deregister for VAT the estimated stock value is likely to be around £6k and is therefore (I am led to believe) likely to fall under the amount for which VAT is payable on the final VAT return. Is this likely to cause problems, as HMRC seems to be concerned about under-declared stock values in their booklet? Should I also do a stock take (very difficult due to the hundreds of small spare parts involved)? A stock take is further complicated by the fact that many spares that I have originate from when I set up the business 10 years ago and no VAT input tax has been claimed on them. So do I just stock-take the items bought in since VAT registration or do I have to also include older obsolete items?

Any advice will be appreciated.

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Postby deanshepherd » Wed Nov 30, 2005 1:08 am

A few thoughts..

VAT de-registration can indeed be a fairly simple process. However, you can only de-register once your 12-month rolling turnover has dropped below £58,000. You cannot de-register on anticipation of this actually occurring in the future.

As far as stock and assets are concerned, if the VAT-inclusive value of the stock/assets is less than £6,714 then you do not have to account for VAT on them.

You do not have to include any stock/assets that you were unable to claim input VAT on. Incidentally, you could have claimed back the VAT on stock purchased prior to registration on your first VAT return.

Remember that the valuation includes business assets as well such as computers, fixtures, office furniture etc.

Such is the nature of valuing second-hand items, the Revenue do not expect it to be completely accurate. However, if you are going to be close to that £6,714 figure I would recommend doing a stock take.

Dean Shepherd
MMI Accountancy

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Postby dippy » Wed Nov 30, 2005 7:39 am

Thanks for the advice...will have to wait until turnover drops.
Will look at doing a stock take as advised.

Many thanks...

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Postby deebee » Fri Dec 02, 2005 7:17 am

I would suggest looking at the VAT dereg leaflet in which you will find that you CAN deregister before you hit the £58k limit. The exact wording is:

You can ask for voluntary deregistration if any of the following occur:

you can satisfy us that your taxable turnover in the next 12 months will not exceed the deregistration limit;

you close down part of your business and you satisfy us that your taxable turnover for the remainder will not exceed the deregistration threshold;

The difficult part, however, is convincing C&E, but if it is clear that the omission of a significant part of your business will bring it below the £58k, you shouldn't have a problem.

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Postby Magicman » Wed Jul 16, 2008 7:57 am

I note the above comments on deregistration problems, can I ask a further question on this subject?

We registered for VAT in good faith a year ago and have been in business development mode since and as such have reclaimed some input VAT but earned no revenue with which to pay any output VAT.

For commercial reasons we have now decided to discontinue the business in the UK without earning any revenue, and therefore will pay no out VAT.

On de-registration, are CE likely to be concerned about input VAT being reclaimed with no output VAT paid? At the time of registration we were anticipating a substantial business as we have in other counties? Any thoughts most welcome.

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