End of VAT Fixed Direct Debit Scheme

Revenue is currently in the process of modernising its Direct Debit facility, and important changes are on the horizon for businesses and tax agents who manage VAT payments through the Fixed Direct Debit (FDD) scheme.

Previously Revenue introduced the Variable Direct Debit facility in January 2019 for payments related to Employer Income Tax, PRSI, USC, and LPT as part of the PAYE Modernisation project. Since then, the majority of employers have successfully adopted this payment method. Now, the same approach is being extended to VAT.

What’s Changing?

Revenue will introduce a new Variable Direct Debit (VDD) facility in June 2025, to align with standard industry practices and enhance the efficiency of VAT payments. Once the VDD is in place, the Fixed Direct Debit option will no longer be offered and will be phased out gradually as customers transition to the new system.

Key Differences Between Fixed and Variable Direct Debit

Here are the main changes of which VAT-registered businesses should be aware:

 

1. Return Filing Frequency

1. • VAT return filing will shift from an annual return to a bi-monthly return schedule.

 

1. Payment Structure

1. • Under the VDD facility, Revenue will debit the exact value of the VAT due from a customer’s bank account on the due date, rather than a fixed monthly amount.
   • This ensures customers pay the correct tax amount on time, reducing the risk of late payment interest charges.

 

Revenue will only debit amounts authorised through the creation of a new Variable Direct Debit mandate.

 

What Action Is Required Now?

No immediate action is required by you at this stage. Businesses should continue making their fixed monthly VAT payments under the current scheme until otherwise advised.

Revenue will be in touch with businesses on a phased basis ahead of their VAT period-end to provide instructions on transitioning to the new VDD facility.

 

In Summary

• The Fixed Direct Debit scheme for VAT will cease in June 2025.
• A new Variable Direct Debit system will replace it, offering more accurate, timely tax payments.
• No changes are needed right now, but communication from Revenue will follow in due course.

This change represents another step toward a more streamlined, modern tax system in Ireland.

Make sure that you contact your accountant/tax adviser to help understand the new VDD system or prepare for the transition.

MF 01/05/25.

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