What is changing?
HMRC will be cancelling the direct debit mandates for businesses for whom they do not hold a valid email address. This is because of banking regulations which require HMRC to give advance notice when they are about to take a direct debit payment. The business will need to set up a new mandate through their business tax account (Government Gateway) or make alternative payment arrangements.
Who will be affected?
All VAT-registered businesses where HMRC do not hold a valid email address.
When does it take effect?
For businesses who are not signed up for MTD, at some point between July and November 2021, HMRC will move their VAT records from an old database (VAT mainframe or VMF) to a new database (Enterprise Tax Management Platform or ETMP). When a VAT record is transferred and HMRC’s system does not hold a valid email address, any direct debit mandate will be cancelled. 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 in to their business tax account. Unfortunately, traders will not know exactly when their record is going to be transferred, so they may need to check for the prompt in advance of more than one VAT return, to ensure that their direct debit payments continue uninterrupted.
An example of the letter that HMRC will be sending to affected businesses can be viewed here.
During the same period (July to November 2021), HMRC will also cancel the direct debits of businesses who are signed up for MTD but for whom they do not hold a valid email address. An example of the letter being sent by HMRC to such businesses can be viewed here.
In both cases, the new direct debit must be set up at least 10 days before the next VAT payment is due.
Are there any exceptions?
No – all businesses for which HMRC does not hold a valid email address will be affected. This will be approximately 170,000 businesses in total.
HMRC has confirmed, however, that any direct debit mandate set up to pay VAT deferred from March – June 2020, under the COVID-19 support arrangements, is completely separate and therefore unaffected.
Actions Required
Businesses must review their business tax account to monitor the receipt of the prompts menitoned above. When received, it is the responsibility of the business to set up a new direct debit and to give HMRC an email address. Hazlewoods as agent cannot do this for them.
If you require further advice about VAT direct debit payments or have any other indirect taxes queries, please contact Julian Millinchamp at julian.millinchamp@hazlewoods.co.uk or call 01242 237661.