An example of where the CGS might have a particular impact is a business where the value of a property is a major part of the equation. While it may seem an obvious decision to make savings by deregistering for VAT if your turnover falls below the limit, caution is advised and you should take professional advice before proceeding. There may also be ways to mitigate the costs associated with deregistering, such as reducing VAT due on deemed supplies of any assets the business owns by running down stock and waiting out the CGS period.
Here are some of the potential traps you need to be aware of… Why deregister? Trap 3 — Beware the capital goods scheme Another factor to be aware of before deregistering is the capital goods scheme CGS. Take advice While it may seem an obvious decision to make savings by deregistering for VAT if your turnover falls below the limit, caution is advised and you should take professional advice before proceeding.
Next article. Author: Peter Watts For more info contact us: Neil Warren considers some practical issues and VAT saving tips. A business can deregister at any time if it expects taxable sales in the next 12 months will be less than the deregistration threshold.
Could this be a worthwhile opportunity for many small businesses? A business cannot deregister on a retrospective basis if it is still trading so it is important to identify the potential benefits when they arise.
The rules for deregistration can be tricky, particularly for users of the flat rate scheme or a business that owns stock and assets when it deregisters. It is important to be aware of these rules to maximise tax saving opportunities and also to submit an accurate final return before the business deregisters. Many businesses might be registered on a voluntary basis because they have saved tax in the past using the flat rate scheme.
Life without worrying about VAT might be an attractive thought for many small business owners. And many other business owners might be tempted to escape before the introduction of Making Tax Digital in April , with its link between VAT returns and online submissions.
So it is a good time to consider some practical issues with the deregistration process and a few tax saving tips as well. This increase recognised the loss of input tax and flat rate scheme windfalls for my clients, which obviously end when a business deregisters. I was surprised that some clients did not appreciate the fact that many businesses cannot claim input tax, such as those trading below the registration threshold or making exempt supplies.
There is a quirk with the FRS rules and deregistration: when a scheme user deregisters, he is deemed to be leaving the scheme on the day before he deregisters HMRC Notice , para See Leaving the flat rate scheme. Here is another twist: it makes sense for Mike in the example to encourage suppliers to invoice his business on 31 December rather than an earlier date.
This is because he can claim input tax on these costs because he left the FRS on the previous day. A business must pay output tax on any standard rated stock and assets it owns at the time of deregistration. The relevant figure is the market value of the asset, so the calculations take into account wear and tear, obsolescence and damage to the items in question.
Customs and Excise. Cancellation of VAT registration. Who can cancel a VAT registration? Where a vendor initiates the cancellation of the VAT registration, the vendor must apply to the Commissioner if — the value of taxable supplies will be less than the compulsory registration threshold of R1 million in any consecutive period of 12 months, or the vendor has ceased to carry on all enterprises.
What is the process of cancelling a VAT registration? The circumstance that gives rise to the cancellation must be clearly stated on the VATe or in a separate letter attached thereto. The letter of acknowledgement may provide further instructions regarding the cancellation process.
The vendor must continue to charge VAT on supplies made and account for output tax and deduct any input tax up to the last day of the final tax period as was advised by the Commissioner. Exit VAT being the output tax on assets on hand at date of cessation must be declared together with any other output tax and input tax for that final tax period in the that VAT return.
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