HMRC have confirmed plans to decommission their existing VAT mainframe by 2022 as part of the transition to Making Tax Digital (MTD), which imposes new reporting and record keeping requirements and will be extended to all VAT registered traders in April 2022. As a result, all customers will be moved to a new system, but businesses who wish to continue paying their VAT via direct debit after migration to the new system may need to reinstate their direct debit mandate by supplying their email address.

HMRC have confirmed they are in the process of writing to all affected customers, advising of the change and explaining what action needs to be taken to ensure continuity of direct debit payments. More than 150,000 VAT-registered businesses will be contacted, where HMRC does not hold a valid email address.

Automatic cancellation of VAT Direct Debits as part of MTD preparation

Affected businesses will largely be those who aren’t already signed up to HMRC’s MTD scheme. HMRC have already started transferring customer accounts, and have set a target to transfer all accounts over to the new system by September 2021 in preparation for MTD, but are unable to confirm exactly when individual accounts will be migrated.

As customers are transferred to the new system, their direct debit will be cancelled automatically, and as a result they will be required to pay their VAT via a different method if the direct debit hasn’t been reinstated, although this is something that HMRC is keen to avoid.

This is because UK banking regulations stipulate that a valid contact point for customers using direct debit must be held at all times, so that customers can be notified in advance of the date debits will be taken from their account as well as the exact amount.

How do I restore my direct debit in the new system?

HMRC will contact affected customers in writing once the account has been transferred, providing details of how to restore a direct debit in the new system, and how to provide an email address via their Business Tax Account (BTA).

Get in touch

Should you have any questions regarding VAT payments, need help reinstating a direct debit within the new system or have any other VAT or MTD related queries, please do not hesitate to get in touch with our team of dedicated VAT experts.

We are well placed to advise you on all VAT related issues, helping to minimise disruption, ensure compliance and navigate any complexities.