Businesses that wish to defer their VAT payments need to take urgent action to cancel any direct debit mandate that is in place.
In a previous article, the Tax Faculty explained that the government is offering a deferral of VAT payments due between 20 March 2020 until 30 June 2020. HMRC has now confirmed that it will not automatically cancel collection of VAT payments by direct debit. Businesses that have a direct debit mandate in place to pay their VAT and wish to defer payment will need to contact their bank to cancel that mandate. This needs to be done before the direct debit is due to be collected.
Businesses will also need to remember to reinstate their direct debit mandate once the deferral is over and to make arrangements to pay the accumulated VAT by the end of the 2020/21 tax year.
Agents cannot set up direct debit mandates on behalf of clients. More information on paying a VAT bill is available on gov.uk.
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We have had one instance of HMRC canceling the Direct Debit. This was confirmed with a screen shot from the bank showing the cancellation was done by HMRC. Has anyone else had something similar? It was for a March VAT Quarter end so payment not due yet.
This happened to me about a year ago. It seems that if no payment has been made in the previous 12 months, HMRC will automatically cancel the direct debit!