VAT deregistration: what happens to unsold stock?
Deregistration can trigger VAT on stock still held, rather than a repayment of the original import VAT claim. Assess its current purchase value and the total VAT due on included business assets: no stock-and-assets VAT is due if that total is £1,000 or less. Gather batch and condition evidence with Cambridge China Bridge.
Assess the remaining stock, not the old refund
HMRC calls this a deemed supply of goods on hand. For China-made stock whose import VAT you reclaimed, assess the remaining goods under the deregistration rules rather than simply copying the original reclaim into a repayment calculation. Use the import VAT guide to revisit the original recovery evidence.
Prepare a stock schedule for the cancellation date. Record the product, batch, quantity, location, ownership evidence and whether VAT was reclaimed. Include stock held by a fulfilment warehouse in your review, and flag goods in transit or held in China for your accountant to assess.
Value stock in its present condition
HMRC normally uses the price you would expect to pay for the goods, or similar goods, in their present condition. If you cannot establish that value, use what it would cost to produce them at cancellation. Do not automatically use the original factory invoice, your retail price or the accounting carrying value.
Ask for a current comparable purchase quote and document differences in specification and condition. Support any reduction for damage or deterioration with photographs, inspection findings and comparable prices. Keep your VAT valuation working separate from the assessment described in valuing unsold imported stock.
Test the total VAT, not each batch
The £1,000 test concerns the total VAT on included business assets, not stock value or a separate allowance for each shipment. Review other assets alongside stock. HMRC generally excludes items on which VAT was not claimed when bought. If goods were received VAT-free through a business transfer from a taxable person, ask HMRC or your accountant to confirm how they should be treated.
Apply each included item's relevant VAT treatment to its assessed value, then total the VAT. If the total is £1,000 or less, no VAT is due under this stock-and-assets test. If it exceeds that limit, account for the full amount, not just the excess. Ask your accountant to check mixed VAT treatments and any business-transfer history.
Keep the evidence and finish the return
HMRC requires a list of all business assets held at cancellation and each asset's value, even where no VAT is payable. Include any stock-and-assets VAT due on the final return and submit it by its due date. Do not delay submission while waiting for purchase invoices.
Give your accountant the stock schedule, valuation evidence, import VAT records and cancellation notice. Cambridge China Bridge's staff in China can help gather supplier quotes and batch-condition evidence. For subsequent purchasing budgets, use importing when not VAT registered to assess import VAT as a cost.
Frequently asked questions
Do I repay all the import VAT I reclaimed?
The stock calculation is based on goods still held and their assessed value at cancellation, rather than automatically reversing the original import VAT claim.
Is the £1,000 limit the value of my stock?
No. It is the total VAT due on included business assets. If that total exceeds £1,000, the full amount is due, not only the excess.
Can I reduce the value of damaged stock?
HMRC's valuation considers present condition. Support your assessment with photographs, inspection findings and comparable purchase prices; do not choose an unsupported write-down.
Do I need a stock list if no VAT is due?
Yes. HMRC requires a list of all business assets held at cancellation and their individual values, even if they are not liable for VAT.