VAT Registration After a Business Owner Dies: What to Do

VAT is often an afterthought in estate administration, particularly for families who were not closely involved in the business. But the consequences of ignoring it can be significant — unpaid VAT is a preferential debt of the estate, and late filing penalties can accumulate quickly. This guide covers what needs to happen with VAT when a sole trader, partner, or other VAT-registered business owner dies.

Notifying HMRC and the 30-Day Deadline

Any change in the legal entity responsible for a VAT-registered business must be reported to HMRC within 30 days. The death of a sole trader is a fundamental change of this kind — the sole trader's VAT registration was held in their personal capacity and cannot continue unchanged.

The executor should contact HMRC VAT (via the VAT helpline on 0300 200 3700 or in writing) as soon as possible after the death to explain the situation and establish the appropriate next steps. HMRC will need:

• The deceased's VAT registration number
• A copy of the death certificate
• Confirmation of the executor's identity and authority (grant of probate or letters of administration, once obtained)
• Details of what the executor intends to do with the business — wind it down, sell it, or continue trading

The 30-day clock starts from the date of death. If probate has not yet been granted, it is still important to contact HMRC early. HMRC will generally be sympathetic to executors dealing with the practical difficulties of bereavement, but an early contact establishes goodwill and prevents penalties accruing through inaction.

Transferring or Cancelling the VAT Registration

There are two main routes depending on what happens to the business:

If the business is being wound down

Where the estate is not continuing to trade and the business is simply being closed, the VAT registration should be cancelled. The executor completes form VAT7 ("Application to cancel registration") or notifies HMRC online through the VAT online service. The date of cancellation is typically the date of death.

On deregistration, HMRC will assess the VAT position on the business's remaining assets. Any assets on which input VAT was claimed, with a current combined value of more than £1,000, may trigger a VAT charge on deregistration (known as a "self-supply" charge). The executor should check this carefully before closing the registration.

If the business is being transferred to a new owner

Where the business is being sold or transferred to a new owner — for example, where the estate sells the business as a going concern — the new owner can apply to take over the existing VAT registration number using form VAT68 ("Transfer a business as a going concern — transfer or divide a registration"). Both parties must sign VAT68, and HMRC must consent to the transfer.

If the VAT registration is transferred under the Transfer of a Going Concern (TOGC) rules, no VAT is charged on the sale of business assets — this is a significant advantage and can save a material amount in VAT on a business sale. The TOGC rules require that the buyer must be registered for VAT (or register at the same time), the nature of the business must be broadly the same, and the sale must include the necessary assets to carry on the business.

Filing Outstanding VAT Returns

VAT returns must be filed for every VAT period up to and including the period in which the deceased was trading. This obligation falls on the executor as administrator of the estate.

Practical steps:

• Identify which VAT periods are outstanding — this can be confirmed by logging into the deceased's HMRC online account (if you have the credentials) or by writing to HMRC VAT
• Gather the sales and purchase records for the relevant periods. These should be in the business's accounting records — if these records are not easily accessible, contact the deceased's accountant or bookkeeper immediately
• Calculate the VAT return figures (output VAT on sales, input VAT on purchases, and net payment or repayment due)
• File the return using the deceased's existing HMRC online VAT account, or file on paper using form VAT100 if online access is not available
• Pay any VAT owed from the estate — VAT is a priority creditor of the estate

If the deceased's accounting records are incomplete or inaccessible, HMRC can in some circumstances agree to accept estimated figures. However, this should be agreed with HMRC in advance — submitting an inaccurate return without explanation can result in a penalty.

Can the Executor Trade Under the Same VAT Number?

In some circumstances, the executor may need to continue trading during the administration period — for example, to complete existing contracts, maintain the value of business assets, or protect employees during a TUPE transfer.

HMRC can allow an executor to trade temporarily under the deceased's VAT number while the estate is being administered. This is not automatic — the executor must contact HMRC and obtain explicit agreement. HMRC will need to be satisfied that:

• The executor has been properly appointed and has legal authority to administer the estate
• The trading is necessary and temporary — HMRC will not agree to indefinite trading under a deceased person's VAT number
• The executor accepts responsibility for VAT compliance during the period of trading

An executor who continues to trade without HMRC's agreement risks personal liability for VAT incurred during that period.

VAT on the Sale of Business Assets

Where the estate sells individual business assets — rather than selling the whole business as a going concern — VAT may be chargeable on those sales if the assets were used in a VAT-registered business.

Common examples of VAT-able asset sales from an estate include:

• Plant and machinery, vehicles, and tools used in the business (standard-rated at 20%)
• Commercial property: the VAT position depends on whether the property is new commercial property (VAT-able) or an older property with no option to tax in place (exempt)
• Stock: generally standard-rated at the applicable VAT rate for the goods in question

The executor must account for VAT on these sales through the VAT return and pay it to HMRC. If the estate is no longer registered for VAT at the time of the asset sale, but the sale would take the total taxable turnover above the VAT registration threshold (£90,000 from April 2024), the executor may need to register for VAT in their own right.