1st Contact has many years of experience helping small local businesses with their accounting needs. We are able to offer flexible solutions to clients, including business start-up assistance, book-keeping, and annual accounts. We recognise that smaller companies are often forgotten when it comes to current affairs, so we are running a series of news stories relevant to the small business owner.
Another of our specialist areas of practice is VAT advice. It is absolutely essential to ensure that your company is fulfilling its obligations for VAT registration, but equally important to recognise when you might not need to be registered for VAT due to changes in circumstances such as many smaller firms are experiencing at the moment.
As you are no doubt aware, a business with a turnover of £67,000 or more is obliged to register for VAT purposes. If however, you expect that your turnover is likely to fall over the coming 12 months, then you can voluntarily de-register.
The process of deregistering for VAT is fairly simple and straightforward. There are a number of reasons that de-registration may need to take place, one of which would be a drop in turnover, or expected turnover. There is a threshold of £65,000 for de-registration - if you expect your turnover to be below that figure over the next year, then an application for de-registration can go ahead.
A candidate for de-registration must write to inform HMRC, and explain the reasons why they expect the decrease in turnover to occur, as well as stating what they expect the likely turnover to be. Turnover might decrease because you have lost a contract or have had to reduce your business hours, so you should explain the reasons fully as well as giving HMRC a date for when you want your VAT registration to cease. This cannot be backdated. Form VAT 7 should be used to inform HMRC of your de-registration request.
HMRC may not always agree to voluntary de-registration so it is vitally important to continue accounting for VAT until your request is confirmed. Confirmation will take the form of either a formal notice of cancellation (form VAT 35) or a formal notice of exemption from registration (form VAT 8). Whichever document is received must be kept as part of your VAT accounts for 6 years.
On the day your VAT registration is cancelled you will need to account for VAT on any stock and assets and complete a Final VAT Return.
No further invoices showing your VAT number should be issued, and of course VAT should not be charged from this date.
It is a process that many smaller businesses may need to undertake this year, due to the economic downturn, so please liaise with 1st Contact for advice and assistance with your VAT and any other company accounting matters.
1st Contact Tax offers specialist tax services to contracting professionals.
These services include: Contractor Accounting, Personal Tax for Contractors, Limited Companies for Contractors and Contractor Financial Advice.