VAT deregistration

What it means

VAT registration can be cancelled on request once the statutory conditions are met, chiefly after turnover falls below the threshold, or by the authority where duties go unmet.

Deregistration is not merely administrative: in the final tax period the company must account for tax on assets it keeps and on which it deducted input VAT.

Deregistration does not end every link with VAT. The company still files a return for the final period, and the tax office can audit the periods when it was registered for some time afterwards. An intra-EU acquisition of goods or rising turnover can trigger a new registration duty, so the position needs watching after deregistration too.

How it works in practice

It covers stock, fixed assets and work in progress. The amount follows the residual value, so a recent vehicle or machine makes it a significant item to plan for.

After deregistration the company stops filing returns and control statements but may not show VAT on invoices. Services received from abroad may require section 7a registration.

Before applying we go through the client’s assets and stock on which input VAT was deducted and calculate the tax that will have to be paid. We compare it with what the company gains by no longer adding VAT to its prices. Where most customers are VAT payers who deduct the tax anyway, deregistration often brings the client nothing.

What to watch out for

For real estate the input tax adjustment runs twenty years, and deregistration triggers it. So "we no longer want to be a VAT payer" is a decision to cost out first.

The authority also cancels registration where a payer is inactive or repeatedly fails to file returns. From the decision’s effective date the company may not invoice with VAT, and customers cannot deduct the tax on such an invoice. A cancelled VAT ID is also visible to anyone checking the partner in the list of VAT payers, which erodes trading partners’ trust.