How to set up a VAT Direct Debit

As part of the government’s support for businesses during COVID-19, HMRC gave businesses the option of deferring their VAT payments and cancelling VAT Direct Debit instructions if they were unable to pay on time. This allows VAT to be deferred without incurring late payment interest or penalties. Payment of VAT falling due between 20‌‌ March and 30‌‌ June 2020 can be deferred until 31‌‌ March 2021.

You must continue to file your VAT return on time, even if you deferred payment.

What has changed?

The option to defer paying VAT ends on 30‌‌ June 2020. This means that VAT returns with a payment due date after 30‌‌ June must be paid in full, on time.

If you haven’t deferred any VAT payments or still have a VAT Direct Debit, you don’t need to take any further action. If you have deferred paying your VAT and normally pay by Direct Debit you should now reinstate it.

You should do this at least three working days before submitting your VAT return in order for HMRC to take payment. For further details go to GOV‌‌.UK and search for ‘Pay your VAT bill’.

Can I call HMRC for a chat about my VAT payments?

Please do not call HMRC for more information, everything you need to know is on GOV.UK. HMRC need to leave their phone lines open for those who need them most.

Remember, any VAT payments you have deferred during this period should be paid in full on or before 31‌‌ March 2021. You can make ad hoc payments or additional payments with your subsequent VAT returns to reduce the amount outstanding, if you wish.

If you’re unable to pay the VAT due and need additional time to pay, please contact HMRC before the payment is due. For help go to GOV‌‌.UK and search for ‘If you cannot pay your tax bill on time’, or call 0300 200 3835. If you do call, please quote ‘V1’.

How do I set up a VAT Direct Debit instruction?

Log in to your HMRC online account and select your VAT account. From the VAT page you will be able to select the option Payments and repayments

Select the option to Set up a Direct Debit and on the next screen add your bank account details.

When the process is complete you will see a confirmation code. Print this page and keep it for reference

What if my bank account requires two signatories?

If you require more than one signatory to set up a Direct Debit, you will need to complete a paper form to set up your VAT Direct Debit.

Terms and conditions for VAT Direct Debit

1. You must provide a valid email address in order to use this service. We will use this to send you important notifications about your Direct Debit. The full messages will be available in your online tax account.
2. You must make sure that your bank or building society will accept Direct Debit Instruction for the account you want to use. Direct Debit collections can only be made once the Direct Debit Instruction is accepted.
3. When submitting a new Direct Debit Instruction, you must be authorised to sign for the account as either the sole signatory or authorised to sign on behalf of all the other signatories.
   If more than one signature is required to authorise the Direct Debit on this account, you will need to complete a paper version of the mandate form.
4. The account for your Direct Debit must be a bank account registered in the UK and in British pounds.
5. You must make sure you have enough money in your account to pay the tax due on collection day.
6. The Direct Debit will only take the amount we tell you about in advance. You must arrange to pay other VAT liabilities like surcharges, penalties or interest by other payment methods.
7. If you miss the due date for your VAT payment, or complete your VAT Return late, you could be liable to a financial penalty. If you know that the Direct Debit collection will fail, you must pay by the due date using another method.
8. You can cancel or change your Direct Debit Instruction using our online service up to 5 working days before your VAT payment is due.
9. Your bank may cancel your Direct Debit Instruction if it has not been used for 13 months from the date of setting it up, or from the date of the last payment. This is covered by the Direct Debit dormancy period rule.

Payments will appear on your bank statement as ‘HMRC E VAT DDS’

The Direct Debit Guarantee

This Guarantee is offered by all banks and building societies that accept instructions to pay Direct Debits.

If there are any changes to the amount, date or frequency of your Direct Debit HMRC E VAT DDS will notify you 2 working days in advance of your account being debited or as otherwise agreed. If you request HMRC E VAT DDS to collect a payment, confirmation of the amount and date will be given to you at the time of the request.

If an error is made in the payment of your Direct Debit by HMRC E VAT DDS or your bank or building society, you are entitled to a full and immediate refund of the amount paid from your bank or building society.
If you receive a refund you are not entitled to, you must pay it back when HMRC E VAT DDS asks you to.

You can cancel a Direct Debit at any time by simply contacting your bank or building society. Written confirmation may be required. Please also notify HMRC.

What happens next

HMRC will collect your payments automatically by Direct Debit.

Contact HMRC about your VAT Direct Debit

If you have questions about your Direct Debit after you have set it up, call 0300 200 3700 and quote your VAT registration number.