Deregistering for VAT

Charity_Dalek

I am deregistering for VAT on the 1st Feb and need some help in account for VAT on stock held.

I will have on hand stock that was purchased:
· Before I was registered for VAT
· Whilst I was registered for VAT, at 15%
· Whilst I was registered for VAT, at 17.5%

I am able to account for all of the stock in terms of what was purchase and when.

The VAT 7 form is asking for: Please estimate the total gross value including VAT of the stocks you have on hand for which VAT is due.

Could someone please explain how I achieve what is being asked for by HMRC.

Regards

Robert

TM1976

Take the net cost of the stock you purchased net of VAT and add VAT to it at 17.5%.

The rate at the time of purchase makes no difference only the current rate.

Charity_Dalek

So if I have £5000 (excluding VAT) of stock then the VAT is equal to £875 at 17.5%.

So the value of the stock I have on hand is = £5875.

What would my liability be in this case.

Regards

Robert

TM1976

You include it as output VAT (£875) on your final return.

How old is your stock? Make sure you are valuing obsolete stock at more than you would pay for it now as this would force up your liability.

JasonLVC

Have you read through HMRC Notice 700/11? (http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageExcise_ShowContent&id=HMCE_CL_000087&propertyType=document)

para 6.7 states - If the total VAT on the assets to be included is £1,000 or less (VAT) then no VAT is due to HMRC at all. This means that if the assets you have included in your calculation are all standard rated goods (17.5%) then you do not hjave to account for VAT to HMRC if the total gross (VAT inclsuive) value is £6,714 or less

You have posted your stock value is £5,875 gross (incl VAT) and so this is less than £6,714 and therefore you don't have to account for this as output tax.

In effect, when you bought the stock you reclaimed VAT on it and you don;t have to pay it back to HMRC as it is below the limit HMRC have set where you have to pay it back when you de-register.

Once you are de-registered (your final VAT return will be brown in colour with 9999 in top right hand corner), you can still reclaim for some input tax, specifically accountant and legal fees. You'll need a VAT427 form and original invoices. HMRC do this as they appreciate you may de-register today but your annual accounts may not be due until April, etc.

Charity_Dalek

One thing I didn't mention, as I didn't want to confuse matters, I am on the Flat Rate Scheme at 5%.

Will that make any difference.

Robert

JasonLVC

Charity_Dalek wrote: »

One thing I didn't mention, as I didn't want to confuse matters, I am on the Flat Rate Scheme at 5%.

Will that make any difference.

Robert

Well, etiher way you are below the threshold of £1,000 of VAt so it is kind of a rhetorical question, but for competeness :-

It depends, did you reclaim input tax on purchases when your first registered for VAT?.

The FRS generally prevents you from reclaiming input tax on your purchases in exchange for a favourable % you pay over to HMRC. Upon 1st registation, the business is actually allowed to reclaimed pre-regisration input tax on stock and assets like an ordinary business on the ordinary VAT scheme.

So if you reclaimed input tax originally on that initial stock then that would have to be paid back - but still subject to that threshold of £1,000 if you didn't reclaim any input tax on 1st registration then there is nothing to pay back either.