Following on from our recent blogs about the Coronavirus VAT payment deferral scheme (which deferred VAT payment due between 20 March 2020 and 30 June 2020), with effect from 1 July 2020, the scheme will end and VAT payments ordinarily due from that date onwards will become payable within the normal time frames. The first of such payments will be due by 7 July for VAT returns ending on 31 May 2020.

Many businesses who benefitted from the scheme were required to cancel their Direct Debit to prevent HMRC from automatically collecting the balance due while the scheme was operational. In order that future returns are paid by Direct Debit, those businesses will need to reinstate their Direct Debit mandates.

It is necessary to have set up the Direct Debit mandate at least 3 working days before you submit your next VAT return, otherwise the payment will not be taken, and a manual payment will need to be made. Once you have set up the Direct Debit, payments will be collected automatically from your bank account 3 working days after the payment deadline as usual.

An important thing to note is that agents can no longer set up Direct Debit mandates on behalf of clients. Businesses will therefore need to set these up themselves through their own Business Tax Account. If the business uses an agent to submit their returns, it may be the case that a Business Tax Account has not yet been set up which may add further delay to the reinstatement process.

It is understood that HMRC have made changes to their systems to ensure that no outstanding VAT balances which were deferred under the scheme will be collected by Direct Debit. These outstanding balances will need to be paid by 31 March 2021 with further guidance anticipated on how such payments should be made.