DISCLAIMER
The team at Link My Books are happy to provide users with technical assistance in applying tax rules to their Link My Books setup. We are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice. We highly recommend that users seek advice from qualified accountants for their tax compliance.
This article is written from the perspective of a UK based company that has deregistered for VAT in the UK, or that needs to account for a period while it was VAT registered and a period after its registration was cancelled.
If your business has cancelled its VAT registration, or you need to set up Link My Books to account for a VAT registered period followed by a non VAT registered period, the process is essentially the reverse of becoming VAT registered.
Step 1 - Send all your settlements up to your deregistration date to Xero/QuickBooks
Before making any changes, make sure every settlement dated up to and including the last day you were VAT registered has been sent to Xero or QuickBooks using your current VAT registered settings. You can check this on the Settlement Dashboard.
It's important to do this first. When you change your VAT status, the system refreshes all settlements that haven't been sent yet. Any VAT registered period settlements still waiting to be sent would then go across with No VAT tax rates.
For a detailed walk through of how to send settlements to Xero or QuickBooks please see this help article.
IMPORTANT: If you have any settlements that span multiple calendar months, then you need to send only the part for the month which falls into your VAT registered period.
Don't click 'Send to Xero/QuickBooks' on these settlements on the settlement dashboard. Instead click the 'View' option on the settlement action menu, and then click 'Send to Xero/QuickBooks' on that part only.
Step 2 - Re-do the Accounts & Tax Rates Wizard
Now you can set up your Link My Books account for the period after your deregistration.
Visit the Accounts & Tax Rates Wizard again.
On step 1 of the wizard you will see this screen asking if you are VAT registered in the UK:
This time around select 'UK Non-VAT Registered Business'.
Since you are no longer VAT registered, we will pre-populate your tax rates with 'No VAT' tax rates. We advise that you check these with your accountant or tax advisor to ensure they are correct for your business.
If you sell on Amazon, Amazon account and tax rate mappings for UK Non-VAT registered businesses shows these mappings in detail.
Step 3 - Send all your settlements from your deregistration date onwards to Xero/QuickBooks
When you change your settings the system will refresh all of your settlements that have not already been sent to Xero/QuickBooks. Once we have finished refreshing them and your settlements are all showing as 'Ready to Send' on the Settlement Dashboard, you can begin sending them to Xero/QuickBooks.
IMPORTANT: If you have any settlements that span multiple calendar months, then you need to send only the part for the month which falls into your post deregistration period, using the 'View' option on the settlement action menu as described in Step 1.
⚠️ Already sent settlements to Xero/QuickBooks with the wrong VAT status?
If any settlements were sent with the wrong VAT settings for their period, you will need to rollback the affected settlements, refresh them to take on the correct mappings, and then re-send them to Xero/QuickBooks. This can all be done from the settlement action menu on the settlement dashboard.
Common error after changing mappings: If you see a "Missing Tree Data" error after changing your VAT status or tax rate mappings, this means the settlement is referencing account or tax codes that no longer exist in your updated configuration. To fix this, go to Accounts & Taxes → Account & Tax Mappings, ensure all mappings are complete, then refresh the settlement from the Action menu.
If the error persists, please contact support, we can resolve it quickly.
Step 4 - Remove your VAT number from your sales channels
Once HMRC have confirmed your deregistration, remove your VAT number from each sales channel where you have added it, so they no longer treat your business as VAT registered.
For Amazon, you can do this from the tax registration settings in Amazon Seller Central. Make sure you update this for each marketplace you sell in.
For other sales channels, check the tax or VAT settings in your seller account and remove your VAT number there too.
Step 5 - Speak to your accountant about your final VAT return
HMRC require you to submit a final VAT return covering the period up to and including your cancellation date. You must submit your final return by the due date which HMRC will send to you, or you can check your VAT online account.
You must also account for any stock and other assets you have on the cancellation date if both of the following apply:
you reclaimed or could have reclaimed VAT when you bought the assets
the total VAT due on these assets is over £1,000
Your accountant will be able to assist you with regards to this, along with advising on any changes needed to your VAT settings in Xero or QuickBooks.
You can find HMRC's guidance on cancelling your VAT registration on GOV.UK.