VAT deregistration
October 31st, 2008
With falling profits it may be tempting to deregister for VAT if business turnover falls below the taxable threshold (£65,000 in 2008/09). This enables businesses to be more competitive where non-registered customers are concerned and to save on administration time.
However just as it is possible to claim VAT on goods purchased pre-registration so VAT becomes repayable on goods held at the time of deregistration. This includes goods for resale and assets used in the business. VAT of less than £1,000 is ignored so if the business holds VATable stock and assets of £6,666 or less (or £5,714 when the VAT rate reverts to 17.5%) no VAT becomes due.
If thinking of deregistering it therefore makes sense to run stocks down to a minimal level. In addition, if stock is damaged then it can be valued down for VAT purposes to the price expected to be payable for the goods in their current condition.
The content of this article is for general information only. It should not be relied on and action which could affect your business or personal circumstances should not be taken without appropriate professional advice.
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