A dental practice usually registers for VAT for one reason: its standard-rated taxable income, the cosmetic-only work, retail products and any taxable rents, has crossed the £90,000 registration threshold. The exempt core of the business, the NHS and private dental care that sits inside the Schedule 9 Group 7 exemption, never counts towards that figure. So registration is a function of the taxable fringe, not the size of the practice.

When that taxable fringe shrinks, the logic reverses. A practice that closes its cosmetic line, sells its facial-aesthetics arm to an associate, or simply drifts back towards a mostly-NHS profile can find its taxable turnover falling well below the line that put it on the register in the first place. At that point staying registered is largely administration: quarterly returns and partial-exemption calculations for a recovery benefit that has become small. Deregistration becomes a live option, and sometimes a duty.

This page covers the deregistration decision in full: the two routes off the register, the £88,000 threshold and how it differs from £90,000, what actually counts as taxable turnover for the test, and the two charges that catch practices out on the way out, the deemed supply on retained assets and the final Capital Goods Scheme adjustment. For the wider VAT picture, the dental practice VAT compliance guide is the parent overview.

Why a dental practice ends up deregistering

Most practices that find themselves looking at deregistration did not plan to. A common path: the practice added a cosmetic or facial-aesthetics line a few years ago, that line grew, its standard-rated turnover crossed £90,000, and the practice registered. The line then matures, plateaus, or is wound down. Perhaps the principal who ran it leaves, the cosmetic work moves to a separate company, or the practice deliberately refocuses on its NHS contract. The taxable turnover that triggered registration falls away.

Another path: a practice once crossed the threshold on a one-off basis, registered, and never built the taxable line back up. A third: a retail or product line (toothpaste, brushes, whitening kits sold as products rather than treatment) shrinks as the practice tidies up its offering.

Whatever the route, the result is the same. The exempt dental care that makes up the bulk of practice income carries on regardless, because it never counted towards the threshold and never will. What changes is the small taxable slice that justified being on the register. Once that slice is comfortably below the deregistration line, the practice has a decision to make. Continued registration means continued returns and partial-exemption work, in exchange for recovering input VAT on a now-modest base. For a mostly-exempt practice that recovery is often de minimis or close to it, which is precisely why coming off can be the sensible answer. The interaction with recovery is covered on the partial exemption and input recovery page.

Two routes off the register: voluntary and compulsory

There are two distinct ways a practice comes off the VAT register, and they carry different obligations.

Voluntary deregistration applies where the practice still makes some taxable supplies but expects them to fall below the deregistration threshold over the coming 12 months. Here you apply to HMRC to cancel your registration. You have to satisfy HMRC that the forward-looking taxable turnover figure will genuinely be under the line. This is the typical position for a practice that keeps a small cosmetic or product line running but has seen it drop well under £88,000.

Compulsory deregistration applies where the practice stops making taxable supplies altogether, for example it closes the cosmetic line entirely and becomes wholly exempt. Here you are required to notify HMRC, and you must do so within 30 days of the change that ends your eligibility. This is not optional and not forward-looking in the same way: once you stop making taxable supplies you have a duty to tell HMRC.

The practical point is that the 30-day clock attaches to the compulsory route. If you decide to shut the cosmetic line on a fixed date, diarise the deregistration notification straight away rather than treating it as something to tidy up at the next return.

The deregistration threshold: £88,000

The deregistration threshold is £88,000 of VAT-taxable turnover, measured on a forward-looking basis: you can ask HMRC to cancel your registration when you can show that your taxable (non-exempt) turnover for the next 12 months will be below £88,000, VAT-exclusive.

That figure sits deliberately £2,000 below the £90,000 registration threshold. The gap exists to stop practices ping-ponging on and off the register. If both thresholds were the same number, a practice whose taxable turnover hovered around that single figure could be obliged to register one quarter and entitled to deregister the next. The £2,000 buffer means you register at £90,000 and can only come off once you are clearly below at £88,000. Both figures are unchanged for 2025/26 and 2026/27. The £90,000 registration threshold and how it is measured is covered on the registration threshold page, the natural other end of this one.

Note the test is prospective. It is not about what your taxable turnover was last year but what it will be over the coming 12 months. A practice winding down a cosmetic line can therefore deregister based on a credible forecast of the year ahead, even if the trailing 12 months were higher, provided the forward figure is genuinely below £88,000.

What "taxable turnover" means for this test

This is where dental practices most often go wrong, and it is the single most important thing to get right before you do the deregistration arithmetic. Exempt income does not count.

The supply of dental care, NHS or private, by a registered dentist or dental care professional is exempt under VATA 1994 Schedule 9 Group 7. So is the supply of dental prostheses down the registered chain to a named patient. None of that exempt income counts towards the £88,000 test, no matter how large the practice is.

What does count is the standard-rated income only:

  • Cosmetic-only treatment with no therapeutic purpose, such as purely aesthetic facial aesthetics and cosmetic whitening.
  • Retail product sales (whitening kits sold as products, brushes, and similar).
  • Any taxable rents, for example renting out a surgery room on terms that fall outside the exemption.

The consequence is that a practice with £600,000 of total turnover can be miles below the £88,000 deregistration line, because perhaps only £40,000 of that £600,000 is standard-rated. Getting the cosmetic/therapeutic split right is therefore the foundation of the whole exercise. The principal-purpose test that decides which side of the line a given treatment falls is set out on the cosmetic versus therapeutic principal-purpose page; if you classify income wrongly there, your deregistration figure will be wrong here.

The deemed supply: the sting in the tail

Deregistration is not free of charge. The trap that catches practices is the deemed supply on assets held at the point of deregistration.

When you cancel your registration, VATA 1994 Schedule 4 paragraph 8 treats you as making a supply, in effect selling to yourself, the business assets you still hold and on which you recovered input VAT. You must account for output VAT on the current value of those assets on your final return, exactly as if you had sold them to a third party.

The rationale is straightforward. While registered, you recovered VAT on assets you bought for the business. If you could then walk off the register holding those VAT-relieved assets with no further charge, the VAT you reclaimed would have leaked out of the system. The deemed supply closes that gap by bringing the assets back to account as you exit.

Two important limits keep this proportionate for most dental practices. First, it only bites on assets where you actually recovered input VAT. Equipment bought before registration, or bought while registered but attributed to exempt supplies so the VAT was never recovered, is outside the charge. Second, there is a de minimis that often removes the charge entirely.

The £1,000 let-out

No deemed-supply VAT is due at all where the total VAT that would arise on the retained assets is £1,000 or less. At the 20% standard rate, £1,000 of VAT corresponds to roughly £5,000 of asset value, measured on the basis explained below.

This de minimis is why the deemed supply is a non-event for a great many mostly-NHS practices. A practice whose recoverable-VAT assets are some used surgery equipment and a few fittings, now well depreciated, will frequently come in under £1,000 of VAT and pay nothing. The charge becomes real for a practice that recently spent on standard-rated-attributable assets, the classic example being a practice that kitted out a cosmetic suite shortly before deciding to wind the cosmetic line down. The equipment is still close to its purchase value, the recovered VAT was significant, and the deemed-supply figure can sail over £1,000.

Remember the £1,000 is an all-or-nothing line, not an allowance. It is not that the first £1,000 is free; it is that if the total is over £1,000, the whole amount becomes payable. That makes the valuation of the assets, the next section, the pivotal number.

Valuing the assets: replacement cost now, not original cost

Assets are valued for the deemed supply at the cost of replacing them in their current condition, not at what you originally paid. This favours practices with older equipment: a chair that cost £8,000 new five years ago is not valued at £8,000, but at what it would cost to obtain an equivalent chair of the same age and condition now, which is far lower.

The practical effect is that depreciated, well-used kit is valued low, which keeps many practices under the £1,000 de minimis even where the original purchase prices were substantial. It also means the timing of recent purchases matters: assets bought in the last year or two retain most of their value and drive the figure.

You should document how you arrived at each replacement value, with a contemporaneous note kept alongside the final return. HMRC can review the deemed-supply calculation after deregistration, and a defensible valuation trail is your protection.

Worked example A: voluntary deregistration below £88,000

A practice that registered when its cosmetic line peaked now expects standard-rated taxable turnover of only £40,000 for the coming 12 months, the rest of its income being exempt NHS and private dental care. Because £40,000 is below the £88,000 deregistration threshold, the practice can apply to HMRC to cancel. The fact that total practice turnover is far higher is irrelevant: exempt dental income is ignored for the test. The practice's accountant prepares a forward forecast supporting the £40,000 figure as the basis for the application. (HP §6: deregistration threshold £88,000, 2025/26; exempt income excluded.)

Worked example B: the deemed supply and the £1,000 let-out

On deregistration the same practice holds cosmetic-suite equipment on which it recovered input VAT, now worth £4,000 at replacement-in-current-condition value. The deemed-supply output VAT is 20% × £4,000 = £800. Because £800 is under the £1,000 de minimis, no VAT is actually due. Contrast a practice whose retained equipment is valued at £6,000: the VAT is 20% × £6,000 = £1,200, which is over the £1,000 line, so the whole £1,200 becomes payable on the final return, not just the excess over £1,000. (HP §6: VATA 1994 Schedule 4 paragraph 8 deemed supply; £1,000 de minimis; 2025/26.)

The Capital Goods Scheme final adjustment

For a practice that has carried out a major refurbishment or bought its premises, the deemed supply on equipment is usually not the biggest number on deregistration. The Capital Goods Scheme (CGS) final adjustment is.

The CGS applies where a partly-exempt practice spends £250,000 or more (VAT-exclusive) on land or a building (or £50,000-plus on a single computer). It spreads input-VAT recovery on that capital item over a 10-year adjustment period (five years for computers). Each interval, recovery is recalculated against that year's actual taxable-use percentage, clawing back or refunding VAT as the exempt/taxable mix shifts.

Deregistration triggers a final adjustment on any CGS item still inside its adjustment period. The remaining intervals are dealt with as a single deemed disposal, applying the taxable-use position at deregistration to the rest of the period. A practice that recovered VAT on a refurbishment because it then had meaningful taxable use, and that now moves to wholly exempt use by deregistering, can face a clawback of a substantial portion of the VAT originally recovered on the capital item.

This matters because the CGS clawback is frequently a number in the thousands or tens of thousands, dwarfing the equipment deemed supply. A practice that refurbished a year or two before deciding to deregister should size the CGS adjustment first, because it can change the deregistration decision entirely. The mechanics of the scheme and how the intervals work are set out on the Capital Goods Scheme on refurbishment page.

Worked example C: the CGS final adjustment dwarfs the deemed supply

A practice still has a £300,000 cosmetic-suite fit-out (£60,000 of input VAT) sitting in interval 6 of its 10-year CGS period, originally recovered at around 20% taxable use. Deregistering to wholly exempt use triggers a final adjustment that treats the remaining four intervals as 0% taxable use. With roughly £6,000 of VAT attributable to each remaining interval and a 20-point fall in taxable use, the clawback runs into the low thousands across the four intervals, materially larger than the £800 deemed supply on equipment in Example B. The lesson is that for a practice that recently refurbished, the Capital Goods Scheme, not the equipment deemed supply, is usually the real cost of coming off the register. (HP §6: CGS, 10-year period, final adjustment on deregistration, VAT Notice 706/2; 2025/26.)

Timing the exit and the final return

Coming off the register is a sequence, not a single act. The steps are:

  • Choose the effective date of cancellation. For voluntary deregistration you can ask for a date, subject to HMRC agreement; for compulsory deregistration it follows the event that ended eligibility.
  • Account for the deemed supply on the final return. The Schedule 4 paragraph 8 output VAT on retained assets, and any CGS final adjustment, both fall to be dealt with on your final VAT return.
  • Settle any outstanding VAT. Pay what is due on that final return, including the deemed supply and CGS adjustment where they exceed the de minimis.
  • Keep your records for six years after deregistration, including the deemed-supply calculation, the CGS working and the asset valuations.

Getting the effective date and the final-return treatment right is what turns deregistration from a clean exit into one that produces an unexpected assessment later.

Should you deregister at all? The trade-off

Deregistration is a genuine decision, not an automatic consequence of dropping below £88,000 (except in the compulsory case where you stop taxable supplies entirely). Coming off the register means:

  • You lose the ability to reclaim input VAT, though for a mostly-exempt practice that recovery was already small and may have been de minimis anyway.
  • You stop filing VAT returns and stop doing partial-exemption calculations, a real administrative saving.
  • You may face a deemed supply and CGS adjustment on the way out, a one-off cost to weigh against the ongoing saving.
  • If the cosmetic or product line revives past £90,000, you will have to re-register, with the associated set-up cost.

For a practice that has genuinely and permanently shifted to a mostly-NHS or wholly-exempt profile, with modest retained assets and no live CGS item, deregistration is usually the right call: small recovery given up, real admin saved, little or no exit charge. For a practice that refurbished recently or that expects its taxable line to bounce back, the calculation is finer, and the exit charges can tip the balance towards staying registered for now.

Re-registration if taxable income comes back

If, after deregistering, your taxable (non-exempt) turnover grows again and crosses the £90,000 registration threshold, you are required to register once more. That brings back the full set-up and ongoing-return obligations, and you will again be running partial exemption across your exempt and taxable supplies.

The administrative cost of coming off and going back on is the reason to be cautious where a revival is plausible. A practice that expects to relaunch a cosmetic line within a year or two may be better staying registered through the quiet period rather than deregistering and re-registering in quick succession. The on/off churn carries cost on both transitions, including a potential second deemed supply when assets are re-acquired into the VAT net.

Common errors to avoid

The recurring mistakes on deregistration are predictable, and all are avoidable:

  • Forgetting the deemed-supply charge and later receiving an assessment plus interest because the final return omitted the Schedule 4 paragraph 8 output VAT on retained assets.
  • Missing the CGS final adjustment where the practice deregisters with a refurbishment or freehold still inside its 10-year period; this is frequently the largest number and the easiest to overlook.
  • Treating exempt income as if it counted towards the £88,000 test, either by including NHS and exempt private dental care (which can make a practice wrongly think it cannot deregister) or by under-counting standard-rated income.
  • Deregistering then immediately breaching the registration threshold again, churning on and off the register where the taxable line was never going to stay below the line.
  • Missing the 30-day notification where the practice stops making taxable supplies and the deregistration is compulsory rather than voluntary.

In practice we have sized the exit for a practice that wound down its cosmetic line and wanted to deregister, working out the deemed-supply charge and the final Capital Goods Scheme adjustment before submitting the application, so the exit did not produce an unexpected bill. The pattern is consistent: the deregistration decision is mostly about the two exit charges, and you want them quantified before you act, not after the final return is filed.

Because the deregistration figure depends entirely on getting the taxable/exempt split right, this page works alongside the rest of the VAT cluster: the cosmetic versus therapeutic test tells you which income counts, the partial exemption page tells you what recovery you are giving up, the Capital Goods Scheme page covers the adjustment that is often the real cost, and the registration threshold page is the other end of the same line. Tracking the NHS-private mix in your management accounts is what tells you, month by month, when the deregistration question is becoming live.