Independent VAT Consultant
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VAT: Deregistration own goal

Businesses should check if output tax is payable on assets still owned on the date of deregistration. Neil Warren explains that ignoring this point can lead to high VAT assessments.

6th Nov 2020
Independent VAT Consultant
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A commercial property up for sale or rent.

In the Slaymark case (TC7709) the partnership was issued with an assessment for £266,666 in respect of a commercial property it still owned on its date of deregistration.

Deregistration request

Imagine the following situation: a husband and wife partnership owns a commercial property and has been charging VAT on rental income for many years. However, the annual rent is less than the VAT registration threshold of £85,000 and they ask you, as their accountant, to deregister them from VAT. The partnership has no other taxable income. Should you agree to their request?

Check correct threshold

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Replies (3)

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By Paul Crowley
06th Nov 2020 18:18

Is this a tax on DIY or has some firm gat a seriously increased PII premium?

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By practice for sale
08th Nov 2020 12:25

I had a similar situation - client deregistered and later got a letter pointing out the omission of output tax on the opted property. I had taken over the client and was not aware of the option to tax because they were running FHL so charging & claiming vat seemed fine anyway.

They had opted on purchasing the FHL complex because they were advised to do so by their then accountant so as to not have to pay input tax on purchase under the TOGC rules. Previous owner had opted.

So the oddity was that they had not claimed vat but were expected to pay output tax on deregistration.

As with Neil's case HMRC reinstated vat reg so they didn't have to pay so problem solved but it was a stressful experience.

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By Amolakjit
09th Nov 2020 10:20

VAT is payable not only that VAT was claimed when property was purchased. It is also payable if the VAT was not claimed due to going concern transfer.

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