HMRC’s existing VAT mainframe computer is to be decommissioned in 2022. What will this mean for your business and the way you pay your VAT bills?

All change. HMRC intends to start moving taxpayer accounts to a new IT system in July 2021 and hopes to finish by September 2021. This change will affect VAT-registered businesses that are not signed up to Making Tax Digital (MTD), i.e. mainly voluntary registrations. The new system will also affect taxpayers who pay their quarterly VAT return bills by direct debit.

Tip. If you pay your VAT by direct debit, rather than another form of electronic payment, you get an extra three working days before the payment is made. This could be an extra five days if weekends are involved. It’s worth thinking about switching to this method if you don’t already use it.

Banking regulations. In line with banking regulations, HMRC has to inform taxpayers paying by direct debit of both the amount of the payment and the date it will be taken. Due to the short timeframe between submission of the VAT return and payment of the tax, HMRC says it will be unable to send postal notifications when the tax account is moved and it will have to use business email addresses instead. If there is no email address held, the direct debit mandate will be cancelled.

Trap. HMRC cannot advise exactly when your tax account will be migrated to the new platform. You will only know when you login to the old portal. If the obligation to file your VAT return is still there, you will know the change has not yet happened for your account.

Notifications. HMRC will have to cancel the direct debits of taxpayers for whom it does not hold an email address before moving them to the new system. It will write to these taxpayers using a special letter. Affected taxpayers will therefore need to login to their business tax account to re-set their direct debits and to provide a contact email address.

Tip. If you do not reinstate your direct debit, you will have to pay your VAT through an alternative electronic payment method.

If you do not have an email address for HMRC to contact you, it will be necessary to reset your direct debit when your account moves to the new IT system. Consider paying your VAT by direct debit if you don’t already.

Sourced from Tips & Advice published 09.07.2021