The Value Added Tax (amendment) Regulations 2025
Published 14 May 2025
© Crown copyright 2025
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Who is likely to be affected
Businesses who are de-registering from VAT.
General description of the measure
The measure allows for a change to the time period for the submission of a final return by a business who is no longer VAT registered. It provides the Commissioners for His Majesty’s Revenue and Customs with power to extend the deadline for a business to submit its final return.
Policy objective
The measure provides a legislative basis to a current administrative practice that ensures fairness and equity in the VAT de-registration process by providing businesses additional time to submit their final return where necessary.
It allows HMRC to extend the time period where processing delay and compliance activity make it difficult or impossible for a business to meet the deadline specified in the regulations for the making of a final return.
It also brings the provision for final returns in line with the provision for regular returns where HMRC already have a power to extend the time limit for making a return.
Background to the measure
Under the VAT regulations, a business cancelling its VAT registration must submit its final return within one month from the date the cancellation takes effect, and an additional week is allowed for electronic returns. The time limit for making payment on the return is the last day the return is due, and automatic penalty and interest are raised for late payments.
In practice, internal processing can delay the issue of the final return in some cases, which makes it difficult or impossible for the business to meet the submission and payment deadline specified in the regulations. Consequently, the business may incur a liability to a penalty and interest for late payment through no fault of their own.
To mitigate this problem, the practice has been for HMRC to extend the time limit for a business to submit its final return by an administrative concession.
This measure provides a regulatory basis that establishes the current operational practice by giving the Commissioners a power to extend the time for a business to make its final return.
Detailed proposal
Operative date
The expectation is that the statutory instrument giving effect to the change will be laid in May and come into force on 13 June 2025.
Current law
The legislation that relates to the making of a final return is contained in Regulation 25(4) of the Value Added Tax Regulations 1995 (SI 1995/2518). It provides that a person who has ceased to be liable or entitled to be registered under any of the relevant schedules of the VAT Act 1994 must make a final return. The final return must be made within a month from the date the cancellation of the registration takes effect (a further week is allowed by direction under regulation 25A(20) if the return is made using an electronic system).
Significantly, the current legislation does not provide the Commissioners with power to extend the time limit specified in regulation 25(4).
Proposed revisions
The Value Added Tax (Amendment) Regulations 2025 amends the regulation 25 of the VAT Regulations 1995 to insert a new paragraph (4AA) which will provide the Commissioners with a power to extend, by direction, the period specified in paragraph 25(4) for the making of a final return, whether or not that period has expired.
Summary of impacts
Exchequer impact (£ million)
| 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 |
|---|---|---|---|---|---|
| — | Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure has no impact on individuals. The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be a disproportionate impact on those in groups sharing protected characteristics.
Impact on business including civil society organisations
It is not expected to impact businesses or civil organisations.
Operational impact (£ million) (HMRC or other)
HMRC is expected to incur minimal IT change cost.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
Formal monitoring is not required as the measure maintains the status quo, although it may be reviewed periodically to ensure it continues to meet policy objectives.
Further advice
If you have any questions about this change, contact the VAT Registration and Accounting Policy team by email at cit.vatregistrationandaccountingpolicy@hmrc.gov.uk.
Declaration
James Murray MP, Exchequer Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.