If you’ve ceased trading, your turnover has fallen, or you’ve changed how you run your business, you may no longer need to be VAT registered.
Subject to eligibility, you can ask HMRC to cancel your VAT registration.
This is known as VAT deregistration.
Once your VAT registration has been cancelled, you stop charging VAT, you can no longer reclaim VAT on your business purchases, and you no longer have to submit quarterly VAT Returns.
At a glance:
- You can usually cancel your VAT registration if you stop trading or no longer need to be registered.
- You must tell HMRC if your business closes or becomes ineligible for VAT.
- After deregistration, you stop charging VAT and usually submit one final VAT Return.
When can you cancel your VAT registration?
The most common reason for sole traders is that you’ve stopped trading altogether.
You may have closed down the business, retired, or become an employee.
You can also apply to deregister if you expect your VAT-taxable turnover to remain below HMRC’s deregistration threshold.
Some businesses choose to deregister because remaining VAT registered no longer makes commercial sense. This is often the case where most customers are members of the public who cannot reclaim VAT.
HMRC explains the circumstances in which you can cancel a VAT registration on its guidance page: Cancel your VAT registration.
Do you have to cancel your VAT registration?
If you stop trading or your business ceases to be eligible for VAT registration, you need to tell HMRC.
If you simply expect your turnover to fall below the deregistration threshold, cancelling your registration is usually a personal choice rather than a legal requirement.
Some businesses remain voluntarily registered because it allows them to reclaim VAT on purchases or because many of their customers are VAT registered themselves.
If you’re still deciding whether you should remain registered, our guides to VAT registration for small businesses and the VAT guide for sole traders explain the wider rules.
How do you cancel your VAT registration?
Most businesses can apply online through their HMRC VAT account.
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You’ll normally be asked why you’re cancelling your registration and the date you want the deregistration to take effect.
If you’re unable to apply online, HMRC also explains the alternative options on its website.
Once HMRC has processed your application, it will confirm your deregistration date in writing.
What happens after your VAT registration is cancelled?
From the effective date of deregistration, you should stop charging VAT on your invoices.
You will usually need to submit one final VAT Return covering the period up to the cancellation date.
Depending on your circumstances, you may also have to account for VAT on certain business assets and stock that you still own when your registration ends.
HMRC’s guidance explains when this applies and how the calculation works.
Can you reclaim VAT after deregistering?
Generally, no.
Once your VAT registration has ended, you cannot normally reclaim VAT on purchases you make afterwards because you are no longer VAT registered.
This is one reason why some businesses choose to remain voluntarily registered even when they are no longer required to do so.
If you regularly buy equipment or incur significant business costs, it’s worth considering the wider financial impact before cancelling your registration.
What if you start trading again?
Closing your VAT registration doesn’t prevent you from registering again in the future.
If your business grows, your circumstances change, or your taxable turnover exceeds the registration threshold again, you can apply for a new VAT registration.
If you’ve stopped trading temporarily rather than permanently, read our guide to closing down your sole trader business before deciding whether deregistration is the right option.
Keep your business records
Cancelling your VAT registration doesn’t mean you can immediately throw away your paperwork.
You should continue to keep your VAT records, invoices and supporting documents for the required retention period in case HMRC asks to see them.
If you’re also closing your business, our guide to how long sole traders should keep tax records explains what you need to retain.
For more information, see our guides to the VAT registration threshold, VAT registration for small businesses, VAT explained and closing a sole trader business.
