HMRC internal manual

Debt Management and Banking Manual

DMBM531230 - Annual accounting scheme: Removal from the scheme

Customers will be removed from the scheme for the following reasons:

Manual Actions

  • 2 consecutive failed direct debits (e.g. insufficient funds in the traders account); all failures will be investigated by Banking. If the direct debit failed for technical reasons the customer will not be removed from the scheme;
  • taxable turnover exceeds the specified threshold i.e. once a customer is in the scheme they can remain in it until the value of their taxable supplies goes over £1,600,000 per year. Unless the customer exceeds this limit significantly, they will be withdrawn from the scheme at the end of the accounting year in which the value of their taxable supplies goes over £1,600,000.
  • at the customers request
  • at the Departments request (e.g. revenue risk or if they have calculated their expected annual taxable supplies incorrectly, or otherwise not eligible to use the scheme).

Automatic actions

  • the customer goes missing;
  • failure to file and pay the annual return by payment enforcement run date;
  • deregistration – when a customer deregisters for VAT they will need to complete a final VAT return. If this covers a period of 4 months or more, they will get 2 months to return it and pay the balance of VAT due. If the final VAT return is for less than 4 months then they will only be given 1 month to complete and return it.
  • insolvency – if the customer becomes bankrupt or insolvent they must stop using the scheme immediately.