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Reinstatement of Direct Debits for VAT

Date posted: 23rd Jun 2020

As has previously been reported, no UK business was required to make VAT payments in the period from 20 March 2020 until 30 June 2020.

However, whilst Taxpayers will be given until 31 March 2021 to pay any liabilities that have accumulated during the deferral period, all VAT payments falling due after 30 June 2020 will be payable as normal.

It’s important than businesses are not caught short in reinstating their direct debits in order to make these payments. Therefore, direct debit mandates must be reinstated so that they are in place in time for payments due in July 2020 onwards.

To make sure that no payments are taken for VAT due in the deferral period, any outstanding returns from this period should be filed and three working days allowed to elapse before reinstating the direct debit mandate.

When it comes to submitting the businesses next VAT Return, i.e. after the end deferral period, three working days must be allowed before submission after reinstating the direct debit mandate. This advice is contained in previous HMRC guidance which suggests direct debit mandates usually need to be set up three working days before a VAT return is filed to ensure payment is taken correctly.

Unfortunately, we as agents cannot set up direct debit mandates on behalf of our clients, however the business can set up the mandate through the business tax account.

HMRC has moved to allay the fears of taxpayers and agents in recent days by confirming that it will not collect the outstanding balance of deferred VAT when the direct debit mandate is reinstated.

Therefore, arrangements will need to be made separately to pay the deferred VAT by 31 March 2021. We await further guidance from HMRC on the mechanism for businesses to do so and will update this article upon any further announcements.

Should you have any queries on the above or need further support with your VAT Returns please contact our Managed Services partner Ian Jarvis and his COMS team, who will be happy to assist.

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