Reinstate direct debit payments to avoid penalties
Businesses who have cancelled their direct debits payable to HMRC to defer VAT payments now need to set up a new one to avoid penalties. Failure to get a direct debit set up in time could result in the business paying their VAT bill late and, potentially, a penalty charge.
As part of the government’s package of Coronavirus support, all UK VAT-registered businesses have been able to defer VAT payments due between 20 March and 30 June 2020 until 31 March 2021 at the latest. Those businesses that usually pay their VAT by direct debits were required to cancel their direct debit mandates to benefit from this deferral, and many did so to take advantage of the opportunity.
The VAT deferral ceases to apply from 1 July, which means that from that date businesses will have to pay their VAT bills on the normal due date. HMRC has recommended that new direct debit mandates be set up at least three working days before submitting a VAT return to ensure the amount is taken in time.
Businesses with a VAT quarter ending 31 May need to move quickly to make sure they set up their direct debit in time for payment to be taken by the 7 July 2020 deadline. With the current situation, and significant challenges being faced by businesses, this could be missed.
If you have any questions or wish to discuss this or any VAT matter, please do not hesitate to contact Debbie Jennings.