Last week (27 May 2021) we explained that a shift of VAT data to a new platform within HMRC has created an incorrect error message for agents who are attempting to submit VAT returns for traders who are not signed-up to MTD.
This data migration has also played havoc with direct debits set up to pay VAT.
HMRC says this is because the direct debit is automatically cancelled on moving the VAT record to the new system and has to be reinstated. Banking regulations mean that in order to reinstate the direct debit HMRC has to warn the taxpayer in advance of the date that direct debits will be taken from their account, and of the amount to be taken.
This communication has to be done in advance and letters sent in the post are too slow. Therefore, HMRC needs a functioning email address for each VAT registered taxpayer. An email address belonging to the tax agent won’t do, as the communication needs to go to the person who controls the business bank account.
The only way to provide an updated email address to HMRC appears to be from within the Business Tax Account (BTA). Tax Agents do not have access to their clients’ BTA, so can’t update any email addresses in the BTA on behalf clients. We urge all clients to check their BTA now and make sure there is a valid email address for them noted as part of their VAT registration details.
When the business’ VAT record is moved to the new IT platform (sometime between July and November 2021), their existing direct debit mandate will be cancelled, and the trader needs to set up a new one – also through the BTA. However, the taxpayer, and you as the tax agent, won’t be told exactly when the VAT record will be migrated. The only way to tell is that there will be a prompt within the BTA to set up a new direct debit for VAT payments.
This means the trader needs to check their BTA every month to see if a new direct debit is required. This new direct debit mandate needs to be set up at least 10 days before the VAT is due to be paid. If this period or prompt is missed, the old direct debit won’t work, and the new mandate (if any) won’t be effective, so the VAT won’t get paid.
Written by the Tax Advice Network