When the VAT “payment holiday” was first announced in late March, it took HMRC some time to confirm that existing Direct Debits would need to be cancelled to prevent the “automatic” collection of the VAT shown as due on the submitted VAT return.
Subsequently, a number of VAT registered entities found that the VAT payment had been made for a VAT return which could have benefited from deferral. As a result, HMRC has now confirmed that for such taxpayers they can claim a refund.
According to HMRC, the simplest method is to submit a Direct Debit Indemnity Claim to their bank, ensuring that they state they want to claim a refund under the Direct Debit Indemnity Scheme (DDI).
HMRC has said that there is no time limit to make this request, although the outcome seems to be within the determination of the banks. If the taxpayer wishes to contact HMRC directly for a repayment from HMRC, they must ensure that their bank details lodged with HMRC are updated using the online services.
Currently, Payable Orders are not being issued by HMRC and it may take up to 21 days for the refund to be received if the Direct Debit Indemnity Claim process is not used.
Re-instating your Direct Debit – proceed with caution
HMRC are yet to confirm that by reinstating a Direct Debit, this will not result in the deferred VAT being collected immediately. A change in the way that HMRC collects Direct Debits for those using Making Tax Digital for VAT makes this a possibility, and HMRC needs to ensure that this does not happen.
In addition, we have not received assurances from HMRC that any repayment returns received after the deferment period will not be “set off” against payment returns that were deferred. If you fit this scenario we’d be grateful if you would let us know if you receive your repayment in full or suffer “set off”.
If you have any queries regarding these or any other VAT matters, please contact our VAT Director, Ian Marrow at Ian.firstname.lastname@example.org