We understand that HMRC is in the process of writing to more than 150,000 VAT-registered businesses explaining that they may need to set up a new direct debit mandate for VAT over the coming months.

From April 2021 HMRC commenced moving the VAT records of businesses not signed up to Making Tax Digital for VAT from the previous VAT mainframe database to the new Enterprise Tax Management Platform.

Agent Update 83 sets out that in cases where a trader pays by direct debit and HMRC does not hold a valid email address, HMRC will not start transferring these records until July 2021. To satisfy banking requirements, HMRC must now hold a valid email address for those paying by direct debit to satisfy banking requirements.

When a VAT record is transferred and HMRC’s system does not hold a valid email address, any direct debit mandate will automatically be cancelled. This means the taxpayer will need to set up a new mandate through their business tax account or make alternative payment arrangements.

Once their record has been transferred to the new database, the trader will be prompted to set up a new direct debit mandate when they sign into their business tax account.

HMRC has advised that businesses will not know exactly when their record is transferred as the exercise is expected to take until November 2021. The advice is to check for the prompt in advance of more than one VAT return to ensure that direct debit payments continue uninterrupted.