The VAT deregistration threshold is currently £88,000 per year and while on the surface, deregistering sounds like a good idea. You need to consider the impact as well as the alternatives:
Pricing perks
VAT deregistration could enable you to lower your prices, in turn making your business more competitive.
You could choose to keep your prices the same and then the ‘VAT’ amount becomes additional profit.
Or perhaps something in between?
Other advantages
Less time and cost for bookkeeping, although MTD (Making Tax Digital) for ITSA (Income Tax Self Assessment) is going to be impacting this from next year.
The downsides
The VAT Payback Rule: If you deregister from VAT and still have stock, equipment, or other assets that you claimed VAT on (and the VAT on the current value of these assets is over £1,000), you will have to repay that VAT to HMRC.
The Capital Goods Scheme (CGS): This applies if your business bought a building or land, or carried out major renovations (over £250,000), and claimed VAT back at the time.
If you deregister from VAT within 10 years of claiming that VAT, you may have to pay part of it back. This is because HMRC sees it as a change in use from taxable to exempt.
Get in touch with us if you have any questions, or you’re unsure of the best choice for you.
You can call us on 01872 267 267, email us contact@whyfield.co.uk, or message us on WhatsApp 0777 49 39 111.
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