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Taxation (UK) · The VAT registration requirements

VAT Deregistration Rules and Tax on Assets in Hand

Updated 11 October 2026 · Fact-checked

A trader can deregister from VAT if expected taxable turnover for the next 12 months will not exceed the £88,000 deregistration limit. A trader must deregister if they stop making taxable supplies. On deregistration, VAT is due on business assets still held, if input tax was claimed on them, unless the VAT is £1,000 or less.

Understand Deregistration from VAT

VAT registration is not permanent. A business registers because its taxable turnover passed the registration limit (£90,000) or because it chose to register voluntarily. Once registered, it stays registered until it deregisters.

The deregistration limit is £88,000. It is lower than the registration limit on purpose. This gap stops a business from flipping in and out of VAT when turnover hovers around the limit.

There are two routes. A trader may deregister if HMRC is satisfied that taxable turnover in the next 12 months will not exceed £88,000. A trader must deregister if they cease to make taxable supplies, for example when the business stops trading. In both cases the trader must tell HMRC. Where deregistration is compulsory, the notice has to be given within 30 days of ceasing to make taxable supplies.

There is one cost. When you deregister, you are treated as making a supply of the business assets you still hold. This stops a trader claiming input VAT on stock and equipment and then leaving VAT with the benefit. The charge applies to stock and assets on which input tax was claimed. It does not apply if the VAT due is £1,000 or less.

The taxable turnover test looks forward. Do not use last year's turnover unless the question tells you to treat it as a guide to the next 12 months.

Key rules to remember

Deregistration limit
Expected taxable turnover in next 12 months ≤ £88,000
Given in the tax rates and allowances. The trader may then apply to deregister.
Registration limit (for comparison)
£90,000
Do not mix it up with the £88,000 deregistration limit.
Compulsory deregistration
Ceases to make taxable supplies → must deregister
Notify HMRC within 30 days of ceasing.
VAT on assets in hand
VAT = current market value of assets held × 20% (VAT-exclusive value × 20%)
Only for assets on which input tax was claimed. Ignore the charge if the VAT is £1,000 or less.
Standard rate
20%
Use it on the VAT-exclusive value of the assets. If the value is VAT-inclusive, multiply by 20/120.

How to solve Deregistration from VAT questions

Use this method for any question on whether and how a trader deregisters.

  1. 1Identify whether the trader is registered and why: compulsory or voluntary.
  2. 2Check whether the trader has stopped making taxable supplies. If yes, deregistration is compulsory.
  3. 3If trading continues, estimate taxable turnover for the next 12 months. Compare it with £88,000. Use only taxable supplies (standard and zero-rated), not exempt ones.
  4. 4If turnover will not exceed £88,000, the trader may deregister. If it exceeds £88,000, the trader must stay registered.
  5. 5List the assets and stock held at deregistration on which input VAT was claimed. Use their market value.
  6. 6Calculate VAT at 20% on the VAT-exclusive value. If the total VAT is £1,000 or less, no VAT is due.
  7. 7State the notification point: the trader must tell HMRC, and for compulsory deregistration within 30 days.

Quickest way: Three-check deregistration approach

When to use it: Use this for objective test questions where you have about three minutes.

  1. Check one: has the trade stopped? If yes, deregistration is compulsory. Go to check three.
  2. Check two: is forecast taxable turnover for the next 12 months £88,000 or less? If yes, the trader may deregister.
  3. Check three: total the VAT on assets and stock in hand at 20% (or ×20/120 if the value includes VAT). Over £1,000 means it is payable; £1,000 or less means nil.

Common mistakes in Deregistration from VAT

  • Using £90,000 as the deregistration limit.

    Students remember the registration limit and assume it works both ways.

    Fix: Write down both: register at £90,000, deregister at £88,000.

  • Testing past turnover instead of the next 12 months.

    Registration questions use historic turnover, so students carry that habit over.

    Fix: For voluntary deregistration, use expected taxable turnover for the next 12 months.

  • Including exempt supplies in the turnover test.

    Students use total sales figures from the question.

    Fix: Count taxable supplies only. Exempt supplies are outside taxable turnover.

  • Charging VAT on assets on which no input tax was claimed.

    Students treat all assets in hand as taxable.

    Fix: Charge only assets and stock where input tax was or could be claimed.

  • Forgetting the £1,000 de minimis or applying 20% to a VAT-inclusive value.

    Students rush the calculation.

    Fix: Check the VAT total against £1,000 and use ×20/120 only if the value includes VAT.

  • Saying a trader who stops trading may choose whether to deregister.

    Confusing the voluntary and compulsory routes.

    Fix: Ceasing to make taxable supplies means the trader must deregister.

Worked examples

Example 1

Mia is VAT registered. Her expected taxable turnover for the next 12 months is £85,000. She holds equipment (input tax claimed) with a market value of £4,000 and stock (input tax claimed) valued at £3,500; both figures exclude VAT. Can she deregister, and how much VAT is due on deregistration?

Show the solution
  1. Limit: £88,000. Expected taxable turnover is £85,000, which does not exceed it, so Mia may deregister.
  2. Assets in hand: £4,000 + £3,500 = £7,500, VAT-exclusive.
  3. VAT at 20%: £7,500 × 20% = £1,500.
  4. £1,500 exceeds £1,000, so the charge applies.

Answer: Mia may deregister. VAT of £1,500 is due on the assets and stock in hand.

Example 2

Omar ceases trading on 31 March. He holds stock on which input tax was claimed, worth £3,600 including VAT, and no other assets. Must he deregister, and what VAT is due?

Show the solution
  1. He has stopped making taxable supplies, so deregistration is compulsory. He must notify HMRC within 30 days.
  2. The value includes VAT, so VAT = £3,600 × 20/120 = £600.
  3. £600 is £1,000 or less, so no VAT is due.

Answer: Omar must deregister and notify HMRC within 30 days of ceasing. No VAT is due on the stock because the VAT of £600 is within the £1,000 limit.

Exam tips

  • Learn the pair of numbers: £90,000 to register, £88,000 to deregister. Objective test distractors often swap them.
  • Read whether asset values include VAT. This decides between ×20% and ×20/120.
  • Section C answers: state the rule, show the turnover comparison, then show the VAT on assets calculation on separate lines.
  • Always compare the VAT on assets with £1,000 before concluding that tax is payable.
  • If a question says turnover is below £88,000 but part of it is exempt, remove the exempt part first.

Practice questions from The VAT registration requirements

Deregistration from VAT in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Deregistration from VAT: frequently asked questions

What is the VAT deregistration limit for ACCA TX-UK?

It is £88,000, given in the tax rates and allowances. A trader may deregister if taxable turnover for the next 12 months will not exceed it.

When must a business deregister from VAT?

A business must deregister when it ceases to make taxable supplies. It must notify HMRC within 30 days of stopping.

Is VAT due on assets when you deregister?

Yes. You are treated as selling the business assets and stock you still hold, if input tax was claimed on them. VAT is charged at 20% on their market value, but not if the VAT is £1,000 or less.

Why is the deregistration limit lower than the registration limit?

The gap stops a trader moving in and out of VAT each time turnover moves slightly around the limit. Registration is at £90,000 and deregistration at £88,000.