Paying VAT by Direct Debit Issue

[jamesbrown]

The other scenario to be mindful of for those who haven't been using the company for sometime is that if a payment is not taken by the DD within 12 months the DD expires.

Also, regardless of activity, the authorisation to file via MTD expires every 18 months, requiring renewal, which is nuts. As mentioned above, the whole system is poor.

[Michael at BI Accountancy]

The other scenario to be mindful of for those who haven't been using the company for sometime is that if a payment is not taken by the DD within 12 months the DD expires.

[AvsFan]

This happened to me. HMRC's VAT systems are terrible. I've provided feedback but never received a response.

I had to change my DD when I changed my bank account. Setup a new DD for VAT with HMRC and it was declined with no reason. However, they don't send an email notification to indicate this is the case, only a message in the online portal. If you don't regularly login to your business HMRC account you wouldn't now and I don't regularly go in.
The VAT payment therefore didn't go through and I received an e-mail with a penalty interest notice (funny how HMRC can notify you by e-mail that you've received a penalty but not that your DD setup was declined?!). So I paid the VAT manually and setup the VAT DD again and monitored the HMRC business account to see for any notification of rejection. This time it appeared to be successful.
However, now being paranoid I went to check the VAT online the day after the DD should have gone through and as with you it indicates that the payment is late and shows a penalty. It in fact isin't late because there is a collection period after the actual due date of 3-5 working days. Once that clears, the interest payment notice disappears.
This is a poorly designed system by HMRC (unsurprising). The notice period should include the 3-5 working days for collection after the VAT due date and only after that period has passed and no monies collected should an Interest payment appear. It makes you believe you have an interest penalty payment when in fact you possibly don't. However, if the monies owed isin't collected for whatever reason then you are charged a penalty. I know of no other DD system that would work this way. It's ridiculous but then it's the HMRC.

[ladymuck]

I have paid VAT by DD for years. In my experience it leaves my account somewhere between the 10th and the 12th every month.

I have never been charged interest.

[BillHicksRIP]

Thanks for the info.

[davetza]

Please see the last post in this thread for more info on this

https://community.hmrc.gov.uk/custom....gov.uk&page=2

Specifically this.

Posted 29 days ago by Jim76
Hi there.. I submitted my return on time but there is a 3 day delay for you to take what’s owed via my direct debit. My account is showing as overdue and I’m now getting charged a small amount of interest ever day!? I can’t find anything in here that explains this.. presumably this will stop when you take the monies but will the unrest still be due? I’ve never seen this before.

Posted 28 days ago by HMRC Admin 20
Hi Jim76,
Unfortunately this is a result of an issue with our systems at the moment.
Once the Direct Debit takes the payment (10th November) any interest charged will be removed.
If it doesn't remove automatically please call our Helpline on 03002003700 so that we can refer this over to the team responsible for removing interest charges.
Thank you.

[BillHicksRIP]

Thanks for the replies. The returns themselves are submitted straight after the quarter ends.

For the quarter ending 31 July 2023, which was the first time I've had to pay VAT in a while (been VAT registered for years), I expected the direct debit to go out on 7th Sept. Factoring in the 3 working days bit, it should have been paid on the 12th Sept but it wasn't taken. I noticed on the 14th Sept and paid the VAT manually and was charged a few days interest. Being a bit paranoid, I'm keeping an eye on this quarter's payment but don't want the same thing happening again so I'll check next week. The last thing I want is to be on the VAT man's tulip-list through no fault of my own.

[WTFH]

I've recently started paying VAT again and for whatever reason the funds aren't being taken by direct debit on the 7th as they should. The previous quarter, I only noticed the payment wasn't taken a week after the due date so I paid it manually and was charged a small amount of interest. For this quarter, the funds should have been taken yesterday but the HMRC site is displaying "OVERDUE VAT for period 1 Aug to 31 Oct 2023 due 7 December 2023" and showing a new daily interest figure.

I've double-checked the direct debit is setup. HMRC's site says "A Direct Debit is set up for your VAT Return. We will collect your VAT Return payment from this account. Warning: Your Direct Debit is about to be collected. If you pay another way now you could be paying twice.".

Is this a HMRC issue or a bank issue? Anyone seen anything similar? Thanks.

Is the DD set to go out before you submit your online return?

Set up the Direct Debit at least 3 working days before you submit your online VAT return, otherwise the payment will not be taken from your bank account in time.

https://www.gov.uk/pay-vat/direct-debit

[Maslins]

Typically VAT DDs are collected a few working days after the "normal" deadline.

From your message, and assuming you were expecting the DD to be collected yesterday for quarter ended 31 October 2023, I'd suggest wait another week. Most likely the DD will be collected next week. If it still isn't, then worth looking into it deeper.

See https://community.hmrc.gov.uk/custom...4-00155d9771aa

[BillHicksRIP]

I've recently started paying VAT again and for whatever reason the funds aren't being taken by direct debit on the 7th as they should. The previous quarter, I only noticed the payment wasn't taken a week after the due date so I paid it manually and was charged a small amount of interest. For this quarter, the funds should have been taken yesterday but the HMRC site is displaying "OVERDUE VAT for period 1 Aug to 31 Oct 2023 due 7 December 2023" and showing a new daily interest figure.

I've double-checked the direct debit is setup. HMRC's site says "A Direct Debit is set up for your VAT Return. We will collect your VAT Return payment from this account. Warning: Your Direct Debit is about to be collected. If you pay another way now you could be paying twice.".

Is this a HMRC issue or a bank issue? Anyone seen anything similar? Thanks.