Tx notes fa22 Final

June 2023 to March 2024 exams
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1.5. VAT Deregistration 
(a)
A trader stops being liable to VAT registration when it ceases to make taxable supplies. The 
trader must notify HMRC within 30 days, and will then be deregistered from the date of 
cessation or from an agreed later date. 
(b)
A trader can also request voluntarily VAT deregistration if expected taxable supplies in next 12 
months are less than £83,000.
Illustration 1
Iris Ltd has been registered for VAT since 1990, and its sales are all standard rated. The company 
has recently seen a downturn in its business activities, and sales for the years ended 30 June 2023 
and 2024 are forecast to be £60,000 and £49,500 respectively.
๏
Iris Ltd can request that HMRC cancel its VAT registration because its taxable supplies during 
the following 12-month period will not exceed £83,000. 
๏
This is provided the fall in the value of taxable supplies is not due to the temporary or 
permanent cessation of taxable supplies. 
๏
The company’s VAT registration will be cancelled from the date on which the request is made 
or from an agreed later date.
(c)
There is a deemed supply of business assets such as plant, equipment and trading inventory 
when a trader ceases to be registered for VAT, unless VAT due on the assets is 
≤
£1,000.
(d)
If a business disposes of its assets and trade as a going concern no output VAT will be 
charged as it will be outside the scope of VAT. This may happen on a sale of the assets and 
trade of the business to a 3rd party or when an unincorporated trader incorporates their 
business. 
(e)
The conditions for this treatment are:
‣
the business is transferred as a going concern
‣
no significant break in trading
‣
same type of trade pursued by transferee
‣
the transferee is or will become VAT registered
Illustration 2 
Daisy is a self-employed builder. She is registered for VAT. The business has been quite successful, 
and Daisy therefore incorporated her trade into a new limited company on 30 April 2023. All of the 
business assets were transferred to the new company in return for ordinary share capital.
๏
No output VAT will have to be charged on the value of inventory and other assets on which VAT 
has been claimed, since the business is transferred as a going concern.
๏
The company must be or will be VAT registered
๏
The company will be able to take over Daisy’s VAT registration number.

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