In the move towards universal digital tax accounts for business, HMRC is trying to force companies to provide bank details on their corporation tax returns, despite kickback by businesses who continue to prefer to receive tax refunds by cheque
Although the majority of businesses submit their corporation tax return online, most automatic repayments of corporation tax are made by cheque rather than by electronic payment. The latest research for HMRC shows that businesses on the whole do not provide their bank details when the requirement is not mandatory.
In order for digital tax accounts to work effectively HMRC is determined to force customers to provide their bank details on corporation tax returns as it claims this would make it easier for businesses to receive timely refunds. At the moment, there is no requirement to provide account details so HMRC can only ‘encourage them to provide their bank details to allow automatic repayments to be made electronically’, in the words of the taxman.
A recent survey of tax agents and corporation tax customers, based on a small qualitative research project, found that omission of the bank account details was down to a lack of awareness of the ‘need and opportunity’ to provide details on their return, while others stated that HMRC software did not prompt them for the information.
For agents, deadlines were the priority when submitting tax returns, not providing bank account details for clients. They also cited concerns that once HMRC had been provided with bank details ‘they could use them to take future payments without seeking permission’, while there were also concerns about data security of online payments, hence the preference for cheque-based repayments.
It was clear that any extension of the collection of bank account details would need to be secure and for a guarantee to be in place to ensure that the information was not used by HMRC for any other purposes.
Plans to raise the cheque minimum threshold to £100 for repayments were acceptable, with a preference for repayments under the threshold to be offset against the following year’s corporation tax liability for reasons of practicality. However, if the amount could be offset against another HMRC debt in a clear, efficient and timely manner, this would also be acceptable.
Currently, the only instance where HMRC requires bank account details on a mandatory basis is for VAT registration.
The HMRC report, Corporation Tax: repayments research, is available here