Taxpayers interested in opting for a voluntary pay as you go (PAYG) approach as part of Making Tax Digital plans, allowing them to make payments at a point of their choosing towards an expected tax liability, are calling for HMRC to ensure the repayments are handled quickly and with ease
Voluntary PAYG will apply to unincorporated businesses, sole traders and landlords, in respect of their income tax/National Insurance contributions/Capital Gains Tax, from 1 April 2018, to VAT from April 2019 and to incorporated businesses, in respect of their corporation tax affairs, from 2020.
According to the consultation outcome, taxpayers will decide how often and how much they want to pay which can be regular set amounts, one-off payments or payments based on estimates of liability.
However, it was suggested that there was unlikely to be a significant take up of voluntary payments as most businesses would be reluctant to pay earlier than required.
The majority wanted voluntary payments to be easily and speedily repayable and HMRC has agreed stating that it will only not make a repayment where a liability is about to become due and the customer failed to pay on time in the previous 12 months.
It is essential as otherwise late repayments could have negative impacts on businesses’ cash flow.
Early repayments will be left until after Making Tax Digita for business is fully implemented.
The consultation document raised the possibility of restrictions over the number of payments or repayments allowed in a period. Respondents thought that although the majority of those taking up voluntary payments were likely to opt for 12 a year/one a month, there would be some who might prefer to pay weekly, in which case a maximum of 53 payments would be useful.
It was also thought that limiting the number of repayments in a period would affect the flexibility and therefore the attractiveness of voluntary payments.
The number of repayments are likely to be low as HMRC has not proposed to pay any interest on voluntary payments so taxpayers would be less likely to pay more to HMRC and would only pay the amount that they felt comfortable with HMRC retaining.
Government responded saying: ‘We will ensure that the online facility to claim a repayment is simple and quick to follow, that there is clear messaging on the implications of claiming a repayment, and that - subject to the necessary robust security procedures - repayment is made promptly after a request. Repayment will be made to the customer’s bank account, or where appropriate, to the originating card.’
Consultation outcome: Making Tax Digital: Voluntary pay as you go is available here.
