Don’t forget to re-instate your VAT direct debits

The deferral of VAT payments due to the coronavirus pandemic comes to an end on 30 June. The VAT payment deferral gives all UK VAT-registered businesses the option to defer VAT payments due between 20 March and 30 June 2020 until 31 March 2021.

With the provision now coming to an end, it is important that those who have deferred a VAT payment due by cancelling direct debit mandates now need to look at reinstating them so that they are in place in time for payments due in July 2020 onwards. Any outstanding returns should be filed and three working days should be allowed to elapse before reinstating the direct debit mandate.

HMRC has confirmed that it will not collect the outstanding balance of deferred VAT when the direct debit mandate is re-instated. HMRC has made the necessary systems change to avoid this happening for businesses in MTD for VAT.

Arrangements will also need to be made to pay the deferred VAT by 31 March 2021; further guidance is awaited from HMRC on the mechanism.

Going forward VAT returns will need to be submitted as normal and on time with VAT due paid in full in line with due dates.

If you’re struggling to pay your tax bill on time or you’re experiencing financial difficulties you can contact HMRC’s Time to Pay service.

Time to pay arrangements are available to all businesses and individuals who are in temporary financial distress as a result of coronavirus. Time to pay arrangements that started before 20 March 2020 should still be paid.

VAT repayments and returns

HMRC will continue to process VAT reclaims and refunds as normal and most repayments are paid within 5 working days.

Repayments will not be offset against any deferred VAT, but they will be offset against existing debts.

You can apply online to move to monthly returns to improve your cashflow if you’re in a repayment position.