Last updated: 14 October 2026
What happens to VAT received from customers after you deregister?
If you receive payment after your deregistration date for sales you made while you were registered, you normally still owe that VAT to HMRC. Under standard accounting, it should already be on your final VAT return, because VAT is due on the invoice date. Under cash accounting, VAT on payments you receive after deregistration must be accounted for on your final return, or reported to HMRC within 2 months. Sales made after the deregistration date have no VAT.
The final VAT return
When HMRC cancels your registration, you file a final return covering the period up to the deregistration date. It must include:
- all sales and purchases up to that date
- VAT on stock and assets you still hold, if you reclaimed VAT on them and the VAT due is more than £1,000
- under cash accounting, VAT on all outstanding sales invoices
Example
A designer deregisters on 30 September. A client pays an invoice dated 15 September for £2,400 including VAT on 20 October.
- Standard accounting: the £400 VAT was already due on the final return, because the invoice was issued before deregistration
- Cash accounting: the £400 must be added to the final return or declared to HMRC separately
Assets and stock on hand
If you keep business assets or stock on which you reclaimed VAT, you must account for VAT on their value at deregistration, unless the total VAT due is £1,000 or less. Assets sold as part of a business transfer are treated differently.
Can you still reclaim VAT after deregistering?
Yes, in some cases. Use form VAT427 to claim VAT on services you received before deregistration but were invoiced for afterwards, for example your accountant’s final fees.
Invoicing after deregistration
- Don’t charge VAT or show a VAT number on invoices for work done after the deregistration date
- Credit notes for earlier VAT invoices may need VAT adjustments with HMRC
Why businesses deregister
- Taxable turnover is expected to fall below £88,000 in the next 12 months
- The business has closed or been sold
- The legal entity has changed, for example from sole trader to limited company
Mistakes when deregistering
Businesses often forget that VAT is due on stock and assets held at deregistration, if the VAT would be over £1,000. Others stop charging VAT before HMRC confirms the cancellation date. Keep your VAT records for 6 years after deregistration and file the final return on time.
A further example
A retailer deregisters with stock worth £8,000. The VAT on that stock would be £1,600, which is over £1,000, so she must pay it on her final return. You can apply to deregister online through your business tax account, and HMRC usually confirms the cancellation date by letter.
Frequently asked questions
Can I keep the VAT if the customer pays late?
No. VAT on sales made while you were registered is due to HMRC.
How long does deregistration take?
HMRC usually confirms within 3 weeks.
Do I need to keep records?
Yes, for 6 years after your final return. See how long to keep VAT records.
Can I re-register later?
Yes, if you go over the threshold again or choose to register voluntarily.
Related: VAT on selling business assets.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT deregistration. See our VAT accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
