Reclaiming VAT after deregistration

Business owners often think that, once a business has de-registered from VAT, it would no longer be able to reclaim any VAT – but this is not the case.

Making a claim 

HMRC says that if a business…

… it can claim that VAT back using the VAT 427 form. 

The current VAT deregistration threshold is £83,000.

What cannot be claimed

It must be stressed that this ruling means VAT cannot be claimed on personal expenditure. It cannot be claimed on non-business activities either.

When claiming

When claiming, partial exemption apportionment must be applied but there is no de minimis limit. The de minimis limit is the threshold below which the exempt tax is regarded as insignificant. This doesn’t apply in this case.

The apportionment percentage to use is the one that applied to the business immediately prior to deregistration.

Other points to note

Businesses are not limited to just one claim, but a new VAT 427 must be completed and sent to HMRC for each one. The claims window ends at four years from the deregistration date.

This route can also be used for making bad debt relief claims, and for adjusting input VAT errors for VAT that the business had failed to reclaim while registered for VAT (effectively voluntary disclosures) following deregistration.

When the claim relates to errors on previous VAT returns, the 427 form can only be used for errors less than £1,000. Claims for more than this must be made on form VAT 652

The VAT 427 form can be completed online, but it must be printed off and sent to HMRC, along with the original invoices. You can find the form here on the gov.uk website

Can we help?

If you have any questions or need help with reclaiming VAT after deregistration, please speak with your Shipleys’ contact or talk to Nancy Cruickshanks and her team. Her details appear on this page.

Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary.

Copyright © Shipleys LLP 2021

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