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HMRC internal manual

VAT Deregistration

Deferment of compulsory deregistration

Where a person is no longer entitled to registration, you may defer cancellation by up to 6 months from the date of receipt of a trader’s deferment request if you consider it to be necessary from the perspective of either:

  1. the disposal of capital assets for which tax invoices may need to be issued, or
  2. to allow input tax to be reclaimed on tax invoices for supplies attributable to the business but which are not received until after the trader has ceased to be a taxable person. The most common examples of these are
* accountants’ and solicitors’ services where there may be a long delay before the tax invoice is issued
* services which may be of a kind which cannot be performed until after deregistration.

Deferment of cancellation for 6 months should cover normal commercial inputs. Where such a period of deferment will not cover the situation, there is provision for the trader to claim repayment of VAT incurred on services that are supplied after the EDC for the purpose of the business carried on before deregistration (VAT 427 claim). You can find out more about 427 claims in VIT - VAT Input Tax.

The partial exemption de minimis limits do not apply to tax incurred after deregistration. You can find more information in VIT - VAT Input Tax.

You should remind the trader that they should submit normal returns during the period of deferment and they must account for tax on any taxable supplies they make during the period.