When you cease trading, it is important to remember to notify Her Majesty's Revenue and Customs within 30 days of the final day of trade. Once they receive this notification, they will send out a final VAT return for you to complete.
When you cease trading, VAT must be accounted for on stock and certain assets at the close of business on the day your VAT registration is cancelled. You must pay VAT if the market value of standard rated items exceeds £7,666 and this is accounted for on your final VAT return.
The standard rate of VAT reverts back to 17.5% in January 2010, at which point the above threshold will reduce to £6,714.28, which is equivalent to £1,000 in output VAT. If the items are valued below this figure, then you will not have to pay over any VAT.
It would be prudent to keep a list of the stock held at the close of business, with a note of the estimated value of any equipment in case there are any queries by HM Revenue & Customs at a later date. If you can obtain a written valuation from the supplier this would be ideal, otherwise you could use advertisements for similar second hand goods as a basis of arriving at an estimated value.
By Jo Nockels
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