Andrew Needham looks at some possible traps a business can fall into when deregistering from VAT that can result in an unexpected bill from HMRC.
Businesses have been going through difficult times recently and some smaller businesses selling to the public, particularly services, find that they have fallen below the VAT deregistration threshold (currently £88,000 p.a.) and think that they would be better off deregistered.
The reasoning behind considering VAT deregistration is that they can either decrease their prices by the VAT amount and become more competitive, keep their prices the same and increase their profit by the VAT amount or even do a mixture of the two.
Potential problems
However, there is a potential pitfall to be considered before contemplating deregistering for VAT. When a business deregisters from VAT, if the VAT on the
