Businesses urged to reinstate VAT Direct Debits

Businesses should reinstate their Direct Debit mandates after the VAT payment deferral introduced due to the COVID-19 outbreak came to an end on 30th June.

The VAT payment holiday gave VAT-registered businesses in the UK the option to defer VAT payments that were due between 20th March and 30th June 2020 until 31st March 2021. As per HMRC advice issued at the time, businesses who wished to take advantage of the deferral and who pay their VAT liability via Direct Debit, had to contact their banks to cancel the instruction. 

However, businesses are reminded that any payments due after 30th June 2020 must be paid as normal. For those businesses who normally pay by Direct Debit, they will need to take action and reinstate their Direct Debit mandates so they are ready for payments due in July 2020 onwards.

The Direct Debit must be set up at least three working days before submitting a VAT return online, otherwise the instruction will not be in place in time for that particular VAT return. If more than one signature is required on the Direct Debit instruction, businesses must use a paper form and this process takes longer.

Businesses also need to be aware that they cannot ask their accountants to set up Direct Debit mandates on their behalf. They will need to do this themselves using their business tax account.

If a business fails to reinstate their Direct Debit in time or if they prefer not to use Direct Debit, other methods are still available such as online or telephone banking.

HMRC has also confirmed it will not collect the outstanding balance of deferred VAT when the Direct Debit mandate is reinstated and has made the necessary change to its systems to avoid this happening for businesses that are registered for Making Tax Digital for VAT.

In time, arrangements will also need to be made to pay the deferred VAT by 31st March 2021. Businesses can make payments towards their deferred VAT now or at any time up to 31st March 2021.

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Date published 23 Jul 2020 | Last updated 20 Mar 2024