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Users of VAT deferral should review direct debits to HMRC

Businesses planning to use the three-month VAT payment deferral need to cancel their direct debits to ensure payments are not automatically deducted.

The VAT deferral will apply from 20 March 2020 until 30 June 2020.

An HMRC spokesperson told Accountancy Daily: ‘For those customers who are unable to pay VAT due between 20 March and end June 2020, you have the option to defer that payment until 31 March 2021.

‘You will not need to apply for deferral as eligibility is automatic. Customers who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay. Please do this in sufficient time.’

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period.

Taxpayers will be given until the end of the 2020-21 tax year to pay any liabilities that have accumulated during the deferral period.

Another approach is to reduce VAT direct debit payments to £1 for the three-month period. In light of the pressure on HMRC systems during this time, that would keep the payment method ticking over.

HMRC has not yet confirmed how the Making Tax Digital for VAT system will handle this three-month deferral.

By Sara White, Accountancy Daily, 26 March 2020