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HMRC internal manual

Labour Provider Guidance

HM Revenue & Customs
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Interventions: education and due diligence: deregistration

The law relating to cancellation of registration is in the VAT Act 1994, Schedule 1, 1A, 2, 3 and 3A.

These VAT Rules and Regulations dictate that a person must have an intention to make or actually be making taxable supplies in order to remain VAT registered.

Paragraph 13(2), Schedule 1, VATA 1994 stipulates:

“where the Commissioners are satisfied that a registered person has ceased to be registrable, they may cancel his registration from the day on which he so ceased or from such later day as may be agreed between them and him.”

Paragraph 13(5), Schedule 1, VATA 1994 states:

“The Commissioners shall not under sub-paragraph (2) above cancel a person’s registration… unless they are satisfied that it is not a time when that person would be subject to a requirement, or entitled, to be registered under this Act.”

Therefore, if a trader whom is being monitored by HMRC cannot provide evidence of taxable supplies or an intention to make taxable supplies, they may not have an entitlement to remain registered.

Each case must be judged on its own merits but if no trading has occurred for a period of time and no contracts/documentation detailing future trade are produced, consideration to deregistration should be given.

In view of the wording of Paragraph 13(2), Schedule 1, VATA 1994, you should ensure that de-registration is effected from the date when the trader ceased to be registrable, rather than from a current or any other date (unless of course an appropriate date can be agreed with the trader).

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

If LMI compulsorily deregisters a business and the customers are known, the VETO process should be followed.