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HMRC internal manual

VAT Deregistration

Cancellation in particular cases: payment on account traders

Because of the nature of the Payments on Account Scheme, there is a risk that traders may reorganise, or set up VAT groups, or transfer businesses as going concerns to obtain reduced payments on account or avoid payments altogether. The earliest indication of such manoeuvres will often be an application to deregister a current business.

As the Payments on Account (POA) scheme consists of the largest VAT payers in the UK, any avoidance activity in the scheme can have a significant effect on the collection of the revenue. Because the POA scheme is about the timing, rather than the amount, of payments, there is a limited window of opportunity to take effective anti-avoidance action once we become aware of a potential case. After the VAT quarter in which the payment should have been made has passed, there is little if anything we can do to recoup the lost cash flow. It is therefore essential to identify possible cases early.

If, when you check the registration details of a trader who has applied to deregister, the payment on account indicator - review code 442 - is set,

  • Determine whether the trader is cancelling the registration because of a Transfer of a Going Concern (TOGC) or the reorganisation / setting up of a VAT group. These are reason codes 2, 7 or 8.
  • If the trader is cancelling for one of these reasons, you should notify the POA Team, Banking, in Liverpool that the trader has applied to deregister.
  • Proceed with the deregistration case as normal and cancel the registration if appropriate.