VAT De-registration

There are many reasons why a business might want to de-register for VAT but the most common reason is that the business turnover has fallen below the current VAT threshold (see table below).

There are several benefits to sole traders and smaller businesses in not being VAT registered, especially those whose business is based on a human resource (labour) rather than buying/selling products. If the business is able to cut it's overheads accordingly, many businesses that have previously struggled to make profit whilst VAT registered have prospered when they lose the burden of VAT.

Benefits of de-registering for VAT

Some of the key benefits of not being registered for VAT include:

  • More competitive - you can charge 10% more than your VAT-registered competitors net price and still provide the lowest quote. For example, a VAT registered company quotes £100.00 + VAT (£120.00) so you could charge £110.00 without VAT and still be cheaper.
  • Less paperwork - There are savings to be made from an accounting perspective as your Accountant will only have to produce your annual books and no longer produce a quarterly VAT statement.
  • Less stress - no matter how disciplined a business owner may be, when times are hard it's often difficult to juggle your finances so when the quarterly VAT payment is due, you won't have to worry about finding the payment.

How to de-register for VAT

You need to complete the form VAT 7 which can be downloaded and printed by clicking this link.

HMRC also provide an overview of the de-registration process which can be view by clicking this link.

We would strongly suggest you seek advice from your Accountant before making any decisions regarding VAT registration.Current VAT Threshold (2011)

The current (2011) VAT threshold for businesses who do not wish to register voluntarily for VAT is set out as follows:

Maximum Income Per Year: £70,000.00
Average Monthly Income: £5833.33
Average Weekly Income: £1346.15