HMRC de-register businesses for VAT for many reasons. The 2 main reasons are that the company is no longer making taxable supplies and that they believe the company was registered purely for fraud purposes.
However, they very often HMRC de-register companies because they stop trading for a short period of time, or because an issue of fraud has arisen on one or more occasions.
HMRC cannot de-register a company for VAT unless that company has no intent on trading. If it stops trading but has plans to re-commence in the near future, that de-registration is unlawful.
Even if a company was deliberately involved in fraud, to be able to de-register the company, HMRC would have to prove that the whole purpose of being registered is for fraud. If there are any transactions not linked to fraud, HMRC cannot de-register the company.