Businesses who pay VAT by direct debit should update their information to ensure they continue to comply with their tax obligations, HM Revenue & Customs (HMRC) has warned.

According to the tax authority, the VAT records of traders who are not signed up to Making Tax Digital (MTD) for VAT were moved from an old database (known as VMF) to a new database (known as the Enterprise Tax Management Platform) in April 2021.

But the transfer is “more complicated” for traders who pay VAT by direct debit but have not provided a valid email address.

Due to this, HMRC said it will not start transferring the records of those affected until July.

If an email address has not been provided at the time of transfer, any direct debit mandate associated with the taxpayer account will be cancelled and a new mandate will need to be established through the business tax account.

Commenting on the new guidance, the Institute of Chartered Accountants in England and Wales (ICAEW) warned that up to 150,000 traders could be affected by the changes, but they will “not know exactly when their record is going to be transferred”.

“Unfortunately, traders will not know exactly when their record is going to be transferred (the exercise is expected to take until November 2021) so they may need to check for the prompt in advance of more than one VAT return to ensure that their direct debit payments continue uninterrupted,” said the regulator.

“HMRC has confirmed that any direct debit mandate set up to pay deferred VAT is completely separate and therefore unaffected.”

If you pay VAT by direct debit but have not provided an email address, click here to access the new guidance.

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