Inventory stock and assets before a UK VAT deregistration review

A business can cancel its VAT registration while still owning stock, tools, computers or property. Establish the effective cancellation date and prepare an inventory of goods held then. Include items at warehouses, with employees or on other premises. The last bank balance or book-depreciation report will not identify every retained item.

HMRC's Notice 700/11 explains that cancellation can create a deemed supply of goods on hand. The result depends on the assets, how they were obtained and the reason for cancellation. Keep an item in the review population until the adviser has a reason to include or exclude it; a fully depreciated book value is not enough to remove it.

For each material item, retain the description, acquisition date, supplier document, original VAT treatment and current use. Identify assets acquired through a business transfer, because the absence of VAT on that transfer does not necessarily end the review. Separate tangible goods from goodwill and other intangible balances rather than treating the fixed-asset ledger as a ready-made VAT schedule.

Have operations confirm disposals close to the cancellation date. A machine removed from the accounting register may still be owned and stored elsewhere, while stock physically present may belong to a supplier. Explain ownership, consignment and hired-equipment cases with the relevant agreements. The schedule should represent the business's goods, not everything seen during a count.

HMRC normally uses the price the business would expect to pay for the goods, or similar goods, in their current condition. Preserve comparable prices, specifications and condition notes as appropriate. If that value cannot be determined, the notice provides a production-cost approach. Have the adviser approve the method and applicable VAT treatment.

Record whether each valuation is VAT-inclusive or VAT-exclusive. Mixing the two can distort the final calculation. A useful valuation note names the item, date, comparable source, condition difference and reviewer. It should also explain a low value for obsolete or damaged goods rather than silently importing a nominal amount from the depreciation schedule.

The notice says no VAT is due on the retained assets if the total VAT calculated on the included goods is £1,000 or less. This is a threshold for the VAT total, not a separate allowance for each asset. Ask the reviewer to aggregate the relevant items and retain the calculation even when the result falls below the threshold.

For a simplified illustration, reviewed values of £3,600 and £2,400 are both VAT-inclusive and entirely subject to 20% VAT. Their combined £6,000 includes £1,000 VAT. The result depends on those assumptions; other rates, excluded assets or different valuations require their own calculation. If the threshold is exceeded, it is not merely the excess that enters the review.

Flag property and items still within a Capital Goods Scheme adjustment period for specialist review. Keep any final adjustment separate from the retained-goods calculation so neither is omitted or counted twice. Give the preparer the approved schedule, unresolved invoices and cancellation confirmation before the final return deadline. Record later corrections through the applicable process instead of assuming cancellation closes every outstanding VAT matter.