HMRC have updated the terms and conditions for direct debit agreements relating to VAT payments: if your direct debit is inactive for 13 months, it will automatically be cancelled under the Dormancy Period rules.

Clients that need to watch for this are those that may have had an unusual year with 4 refund periods in a row, but normally pay VAT and do so by direct debit.

It will also potentially catch any annual accounting users who had a net refund position for one year, perhaps due to a large refurb or capital project. Normally, the next year’s annual accounting payments on account are based on the prior year’s VAT return, so it could easily result in 13 months of no payment.

It is worth being aware of this to ensure there are no missed payments when VAT becomes payable again.

Our guides:

VAT: annual accounting

Penalties (VAT)

Link to HMRC’s VAT Direct Debit instruction


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