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Vat Deferral and Direct Debits

Deferral of VAT Payments

To ensure VAT payments were not made in error during the VAT deferral period, VAT registered businesses were advised to cancel their direct debit mandate with HMRC if they exercised the option to defer VAT payments.

Businesses who cancelled their direct debit now need to take steps to reinstate their direct debit mandates so that they are in place in time for payments due in July 2020 onwards.  The first payment due following the deferral period is for VAT periods ending 31 May 2020, due by 7 July 2020.  Any overdue VAT returns (for periods ending 30 April 2020 or earlier) should be filed as soon as possible, and three working days should then be allowed to elapse before reinstating the direct debit mandate.

A direct debit mandate needs to be set up at least three working days before a VAT return is filed.

ACT NOW to avoid delays in filing future VAT returns or missing payments of future VAT liabilities.

A direct debit mandate must be set up by the business owner. CFW as agents cannot do this on behalf of clients.  A direct debit mandate can be set up through the business owners Gov.uk business tax account.

HMRC has confirmed that it will not collect the outstanding balance of deferred VAT when the direct debit mandate is reinstated.  HMRC has made the necessary systems change to avoid this happening for businesses in MTD for VAT.

Businesses that have previously paid their VAT liability by other means (bank transfer, card payment, etc.) can continue to do so.  Information on all methods of paying VAT liabilities can be found here.  Should businesses not reinstate their direct debit in time for their next VAT payment they can pay the liability by these other methods.

Links

Our previous updates can be found on Facebook and LinkedIn or on our website blog.

A UK Government business support website can be found here.  It contains guidance on all Coronavirus financial measures and business advice.

A UK Government general COVID-19 support website can be found here.  It contains guidance on all matters pertaining to the Coronavirus.

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