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Final VAT return

Final VAT return

I have to complete a final VAT return on deregistration and have a couple of queries:

1. The client is a clothing manufacturer and the made up stock includes both adults and childrens clothes.  If these are valued at cost of material then VAT has been reclaimed on this and I could see that this would have to be repaid.  If however they are valued at selling price then the childrens clothes would be zero rated and therefore no output VAT due.

2. Part of the stock is materials some of which were from abroad and no VAT was charged.  Does this need to be included in the value of stock and VAT applied to it? Technically would asssume it does as is was previously included in the VAT return as acquisitions.

How the various items are treated impacts on whether the client needs to account for the VAT on the stock bearing in mind the £1000 limit.


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20th Dec 2012 16:12

It's a self supply..

The deregistration provisions (Sch 4, Para 8, VAT Act 1994) say that stock at dereg is treated as though sold by the taxable person to themselves as an ongoing non-taxable person at market value, so it's a question of what condition things are in at the time of dereg.

If most things have been made into children's clothing then that supply is zero rated and so won't count towards the £1000.

Acquisitions will need to be included though (unless they've become Zero rated children's clothing), as the dereg rules are about any stock for which credit has been allowed as Input Tax, which would include items recovered under the reverse charge mechanism.

Hope this helps.

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to Nichola Ross Martin
20th Dec 2012 16:14

Thank you very much for your clear answer.  That makes sense. 

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