Coronavirus: restore your VAT direct debits

17th June 2020

The deferral of VAT payments because of coronavirus ends on 30 June (with no extension offered), and businesses will then need to reinstate their direct debit mandates, where they were cancelled.

VAT returns for May will need to be paid on 7 July, so direct debits may need to be reinstated.

As part of the Coronavirus support measures introduced by the government, UK VAT registered business that have a VAT payment due between 20 March 2020 and 30 June 2020, can defer that payment until 31 March 2021 if they choose to, in order to help their cashflow.

HMRC says it will not charge interest or penalties on any amount deferred.

Businesses that pay their VAT by Direct Debit and want to defer the payment were advised to cancel their Direct Debit, so that HMRC would not automatically collect any VAT due.

Restore direct debits

As we approach 30 June, businesses will need to restore their direct debit mandates in order to be effective in July 2020 onwards.

It will be important to make sure that any VAT returns not yet filed are submitted to HMRC at least three days in advance of the direct debit mandate re-starting.

HMRC has confirmed to the ICAEW Tax Faculty that it will not collect any deferred VAT when the direct debit mandate is restored. It has apparently made changes to its systems to ensure such an occurrence is avoided.

As regards the need to pay the deferred VAT by 31 March 2021; HMRC is referring taxpayers to its Time to Pay service.

If you wish to discuss your VAT arrangements, please contact a member of our VAT team.

Set off of R&D claims against deferred VAT

HMRC has also confirmed that where VAT payments are deferred as above, any R&D tax credits that are due to be paid to a company by HMRC will not be set against any of those VAT deferrals, at least not before the revised due date of 31 March 2021.

For more help and guidance, check out our Business after COVID-19: Transition Knowledge Hub.