VATDREG09050 | Calculating the value of taxable supplies: deregistration threshold

Under paragraph 4(1) of Schedule 1 to the VAT Act 1994, a person ceases to be liable to be registered if they satisfy HMRC that the value of their taxable supplies will fall below the deregistration threshold in the following 12 months.

If a person requests voluntary deregistration, they must provide HMRC with evidence to support the claim their taxable turnover will drop below the deregistration threshold in the next 12-month period.

When assessing whether a person is or will drop below the deregistration threshold, you should calculate the tax-exclusive (net) values of their supplies. If the net value is below the threshold, we must be reasonably satisfied that:
• The person will not include some or all of the VAT in the gross value of future supplies; and
• In the case of a retailer, they intend to reduce their prices.

If the person does not plan to reduce their gross prices, they must provide additional evidence to support a projected reduction in turnover before deregistration can be approved. This is because, without a price reduction, their future turnover may exceed the deregistration threshold.

If the tax-exclusive turnover exceeds the deregistration threshold, deregistration may still be allowed provided the person can demonstrate that turnover will decrease due to other factors.

Examples include:
• A planned reduction in opening hours
• The loss of a significant contract

For individuals registered for less than 12 months, projected figures should be annualised to estimate the full-year tax-exclusive turnover.