VAT update: Reinstatement of direct debits for VAT payments

Published: Tuesday 16 June 2020

Businesses that cancelled direct debit arrangements in order to take advantage of the VAT payment deferral arrangements which were announced as part of the COVID-19 support measures will need to reinstate those direct debits so that payments due after 30 June relating to liabilities declared on submitted VAT returns can be made to HMRC.

The first payments falling outside the deferral arrangements will be those due on 7 July relating to VAT returns for the period to 31 May.

To be effective, direct debit mandates usually need to be set up three working days before a VAT return is filed. In addition, any outstanding returns should be filed and three working days should be allowed to elapse before reinstating the direct debit mandate.

Some concern had been ex[pressed that reinstatement of the direct debit would lead to payments which had previously been deferred now being collected, but HMRC has confirmed to the ICAEW Tax Faculty that it will not collect the outstanding balance of deferred VAT when the direct debit mandate is reinstated. HMRC has made the necessary systems change to avoid this happening for businesses in MTD for VAT.

For more on the reinstatement of direct debits for VAT or if you have further queries as to how this affects your business, please get in touch with Julian Millinchamp at or 01242 237661.