UK VAT deferral – direct debits need to be reinstated

Jun 29, 2020

Did your business or a client’s business decide to defer a VAT liability due for payment between 20 March 2020 and 30 June 2020? If this is the case and the business pays its VAT liability by direct debit it will be important to ensure that the direct debit is reinstated for future VAT payments including any VAT payment falling due next week on 7 July 2020 for the VAT return period ending 31 May 2020.

VAT payments that are due after the end of the deferral period will need to be paid as normal; there is no further deferral mechanism once the VAT deferral period ends. However, time to pay arrangements are available to all businesses and individuals who are in temporary financial distress as a result of coronavirus.

If you’re struggling to pay your tax or VAT bill on time, or you’re experiencing financial difficulties you can contact HMRC’s Time to Pay service. It is advised that contact is made with HMRC before the relevant liability falls due for payment. This means that any VAT due but covered by a time to pay arrangement won’t be subject to a VAT default surcharge.

HMRC has also confirmed that if taxpayers want to defer VAT payments due between 20 March 2020 and 30 June 2020 but did not cancel the direct debit in time they can claim a refund of the VAT collected by direct debit. According to HMRC, the fastest way to do this is via a Direct Debit Indemnity Claim to the relevant bank by stating you want to claim a refund under the Direct Debit Indemnity Scheme. According to HMRC, there is no time limit for this request.