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VAT Direct Debits – HMRC may cancel yours

Tax
Ian Marrow
06/09/2021
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HMRC are undergoing an internal re-organisation of their data and transferring taxpayer’s details from an existing database to a new “upgraded” database.

This is acting as a trigger for them sending out letters to say that existing Direct Debits are to be cancelled if HMRC do not hold a “valid” email address for the VAT registered business. This is due to changes in UK banking regulations which requires an email notification to be made prior to DD payments being taken.

If you do receive a letter saying that the existing Direct Debit will be cancelled it would seem that you can’t save the existing DD mandate by providing an email address to HMRC.

HMRC have listed what the taxpayer needs to do, using the business’ Business Tax Account (BTA) – i.e. what you access through your Government Gateway account to manage your VAT affairs.  However, this will require some forward planning.

  • When the current VAT period ends you should log into your BTA and select the “VAT card”.  
  • If you receive a prompt to set up a new Direct Debit then you should follow the onscreen instructions (so ensure you have all the details needed for the bank account and the email address to link to that Direct Debit).
  • If you do not receive a prompt, that may not be the end of the matter. Due to the amount of time HMRC are taking in transferring details between databases this may affect the business for the next VAT return (or if monthly returns even the one after that), so we would suggest that you should repeat the process at the end of the next VAT period until the end of 2021 just to be certain.

If you do not have a Direct Debit in place in time then you will need to use another method to arrange payment of VAT due. A Direct Debit needs to be set up at least 10 days before the VAT payment is due.

HMRC are saying that they may charge penalties for late payment. If this does occur due to a Direct Debit cancellation please contact the RL VAT team.

If Rickard Luckin is your VAT agent we will not be able to set up the Direct Debit for you due to the security steps in place, but if you do have any questions please contact us.

Find out more
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