Businesses should reinstate VAT direct debits

At the outset of the Covid-19 crisis, HMRC announced that all VAT registered business could defer VAT liabilities falling due between 20th March and 30th June 2020 without attracting penalties or surcharges, as long as those liabilities are settled before 31 March 2021.

Businesses that paid VAT by direct debit had to cancel their mandates in order to defer the liability.

The deferral period is now coming to an end on 30th June, so businesses who cancelled their direct debits in order to take advantage of the deferral must now set up a new VAT direct debit. HMRC will not do this on behalf of the business.

The VAT registered business must set up the direct debit itself; accountants and agents cannot do this.

It is worth noting that it takes three working days to set up a direct debit, so businesses need to initiate the process while sufficient time remains before their VAT due date.

HMRC have also stated that they will not collect any deferred VAT via direct debit; this needs to be paid separately before 31 March 2021. Detailed guidance on how this will work is expected soon.

Should you have any queries on the VAT deferral scheme, please get in touch with your usual RG contact.

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