VAT q&a: 'I have closed my company, so how do I deregister?'
The Dubai small business owner wants to understand how to stop being liable for VAT
My small business recently ceased trading. I have cancelled my trade licence and applied for deregistration of my tax registration number for VAT with the Federal Tax Authority. The status showed pre approved and after that I filed my last return. Now the status shows reviewed. What does this mean and what do I need to do now to complete the deregistration? AE, Dubai
When you start deregistering, there are several stages to complete. The first step is to apply for deregistration on the FTA portal. You are required to submit details about why you want to deregister, including providing supporting documentation. So, for a business ceasing trading you will be asked to provide proof of cancellation of your trade licence and detailed financial records. Once the documentation has been reviewed, the FTA will set your status to preapproved and require you to submit a VAT return. After that the status becomes reviewed and you are then asked to submit yet another final VAT return. This is to ensure you do not have any final VAT transactions to report.
Some business owners are finding that the FTA portal link to submit this final return is often not available. You need to log on to the portal on a daily basis and the link for the final return will appear. At this point if you submit a final nil VAT return you will receive an email to say that your registration has been finally cancelled and nothing else is required.
After deregistration, remember to retain records of your VAT transactions in case you are subject to a future VAT audit. Also, if one of the final returns gives rise to a refund, don’t close your company bank account until the refund has been repaid. Refunds are only ever paid into the company bank account included in the VAT registration.
It would be better to apply for deregistration based on falling below the VAT registration thresholds and then closing the company once any VAT had been refunded. Deregistering for VAT based on falling below the thresholds will depend on whether you registered mandatorily or voluntarily and how long it has been since you first registered. To understand the rules fully you should read the FTA guidance on deregistering, available on the FTA portal.
Can I reclaim VAT on any bank charges applied to my company account? FS Abu Dhabi
VAT can be reclaimed on all business expenditure as long as you retain a VAT compliant supplier invoice or receipt and the spend is not in any of the categories specifically disallowed by the FCA. Examples of disallowed expenses are any form of entertaining a customer and vehicle or fuel expenses on a company car that has any element of private use.
There are also restrictions on reclaiming VAT on employee expenses benefits where the benefit is not required for the employee to perform their role or are not required by law.
Most banks now provide regular VAT invoices that summarise the monthly charges and the VAT applied, so based on that you can reclaim the VAT charged. If you are not receiving invoices from your bank, request them as it is a legal requirement for the bank to provide them.
One issue I see regularly, as an accountant who supports small businesses, is that business bank account are often also used for personal transactions. While this doesn’t cause an issue if the transactions are properly categorised, I advise not reclaiming VAT on charges associated with personal transactions, as these are not a business expense and would be disallowed in the case of a VAT audit.
Lisa Martin, a chartered accountant with more than 20 years of commercial finance experience, is the founder of accounting, auditing and VAT consultancy, The Counting House. Email any VAT queries to firstname.lastname@example.org
Updated: November 5, 2019 02:22 PM