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What to do if you have paid VAT instead of deferring it during the COVID-19 VAT deferral period

HMRC have set out the procedure for taxpayers to reclaim VAT they have paid in error (e.g. Direct Debits  not cancelled) when they meant to defer the payment with a VAT return under the COVID-19 VAT deferral easement.

HMRC have announced that a refund can be claimed if a Direct Debit was not cancelled in time during the COVID-19 VAT deferral period. The quickest way to do this is to submit a Direct Debit Indemnity Claim to the bank, ensuring that the refund is claimed under the Direct Debit Indemnity Scheme (DDI). There is no time limit within which to make this request, however, delays will reduce the cash flow benefit, the deferred VAT being repayable by 31 March 2021.

If a business would rather contact HMRC for a repayment, it must ensure that its bank details are updated using HMRC’s online services. It is important to note that due to COVID-19 restrictions, Payable Orders are not being issued by HMRC; this may affect businesses with an overseas bank account. In addition, it may take additional time for the refund to be received from HMRC if the Direct Debit Indemnity Claim process is not used.

For a further discussion of this issue, please get in touch with a member of the Mazars indirect tax team or one of those shown below:

  • Sandy Cochrane- sandy.cochrane@mazars.co.uk;
  • Stephen Morrison – stephen.morrison@mazars.co.uk;
  • Jamie Hyne – Jamie.hyne@mazars.co.uk;
  • James Hurst – James.hurst@mazars.co.uk;
  • Juliet Bailey – juliet.bailey@mazars.co.uk