October 20, 2021
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by  Pradeepan Velayuthan

Has your VAT Direct Debit been cancelled?

Has your Direct Debit been cancelled between July and November 2021? HMRC have cancelled it because they do not have an email address for your business. If you want to pay using Direct Debit, you will need to set it up again using your Business Tax Account.

Why does HMRC need my email?

HMRC are now required to notify you in advance of any money being taken and email is the most efficient method to do this.

How do I know my Direct Debit has been cancelled?

If you have a Direct Debit set up with HMRC to pay your VAT, you should have received a letter in the post notifying you of these changes.

What do I need to do?

  1. Log in or create an online Business Tax Account via HMRC
  2. Log in and select your VAT card
  3. This should direct you to a step by step guide to set up a new direct debit
  4. Your new Direct Debit must be set up 10 days before your next VAT is due
  5. If you do not see instructions, please wait till the end of your current VAT quarter and try again

What happens if I do not provide an email?

Remember to give HMRC your email address along with your Direct Debit. If no email is used, HMRC will not collect your payment via Direct Debit and you could miss your VAT deadline. This could result in penalties.

Find more details below:

Pay your VAT bill: Direct Debit - GOV.UK (www.gov.uk)

I use my personal phone and home internet for my Limited company - Can I claim the full or part of of mobile bills as an expense the VAT on it?

Telephone / Mobile Costs

If the Mobile contract you can claim the 100% cost of the bill and the VAT as an expense. Even though there could be personal use of the mobile, the company or employee does not have to pay any Benefit in Kind taxes (BIK).

However if the Telephone / Mobile contract is in the employee’s name, it gets little complex.  So, if the employee use their personal mobile phone to make a business call only the actual call cost necessarily incurred for the business can be claimed as an expense and not the line rental. Please see the example provided by HMRC.

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim32951

A construction engineer often works out of the office on construction sites. She uses a mobile phone so that she can keep in touch with the office. The phone is mainly used for business calls.

The tariff for the mobile phone includes up to 10 minutes of free calls each month. In one month she pays £22, which is the rental charge only, because her total calls, all of which were business calls, amounted to 8 minutes. No deduction can be permitted because no expense has been incurred in making the business calls.

The following month she pays £28, which is £22 for rental and £6 for calls. Calls that are charged are paid for at a rate of 20p per minute. In the month she made calls totalling 40 minutes, of which 30 minutes were for business and 10 minutes were private. A deduction should be permitted for the cost of business calls, see EIM32945. The amount that can be deducted is £4.50, which is 75% of the call charges, because 75% of the total call time was made up of business calls.

We recommend to have the mobile contract in the company’s name to claim 100% of the mobile cost and to enjoy the tax free benefit.

In the meantime, if the employee have two mobile contracts and one mobile is used 100% for the business purpose, then this cost can be claimed proven it’s used only for business use. 

Broadband

As far as Broadband costs incurred by the employee at home, if the employee is already paying for a broadband contract, the employer cannot reimburse the cost as there will be no additional cost to the employee for using it for business. If the employer decides to reimburse the broadband cost, this will be subject to PAYE and NIC.

In the meantime, if the employee does not already pay for a broadband internet connection at home, and needs one in order to work from home then this cost can be reimbursed by the employer without any PAYE or NIC implications. 

Please refer HMRC’s guidance here

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim01475

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