Can we deregister now?
Q. I own two hairdressing salons and have just completed my year-end accounts. I have noticed that my turnover fell below the VAT registration threshold at the end of the financial year. Does this mean that I can now deregister? If so, can you confirm that this can only be from a current or future date?
A. The answer is “not necessarily”. Deregistration is always based on a forward-looking test, i.e. “do I expect my taxable sales in the next twelve months to be less than £83,000 (the current deregistration threshold)?”
Historic sales are irrelevant, although are obviously a good indicator of the future level of business. The turnover of the hairdressing business would be expected to increase if, say, you took on new staff or additional premises, so deregistration might not be an option. There are some other general pointers to be aware of as well.
Tip. Don’t forget that any exempt and outside the scope sales are excluded from the figure of £83,000. Any services you provide to overseas business customers that are covered by the general business-to-business rule are excluded because they are outside the scope of UK VAT.
Trap. If a business is still trading, then deregistration can only be requested from a current or future date, i.e. it cannot be backdated. This is because a VAT-registered business is classed as a taxable person up until the point when it applies to deregister.
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