Cancelling VAT registration

Many businesses are facing decreased turnover levels and are considering deregistering for VAT. Are there any clawbacks of VAT previously claimed? This depends on whether the business elected to register for VAT.

A business can elect to be registered for VAT even though turnover is below the thresholds for registration. A business which elected to register for VAT may cancel registration by arrangement with the relevant Revenue District. However, it can result in a VAT liability. Any excess of VAT refunded over VAT paid during the 3 years prior to the cancellation (or the period of election if less) must be paid to the Revenue.

If turnover goes below the threshold, a business may also cancel VAT registration. A clawback will not occur as long as the business didn’t initially elect to register for VAT.

Important points to note:

• Check the TR1 or TR2 that was submitted to the Revenue on registration to confirm whether you elected to register for VAT.
• Even if turnover falls below the threshold, a business may still be obliged to be VAT registered e.g. the business receives fourth schedule services.
• A de-registered business must constantly analyse turnover and monitor whether or not it is necessary to register for VAT again.

Ceasing to trade

When a business ceases to trade, the Revenue should be notified as soon as possible so that the VAT registration number can be cancelled. Otherwise, the Revenue will continue to issue VAT returns, and demands for estimated liability will automatically be issued if the VAT returns are not submitted.

A copy of the relevant form TRCN1 can be found here.

See also:

VAT Registration