A massive change in VAT and PAYE is coming as HMRC consults on plan to require all payments to be made by direct debit rather than by bank transfer, card or even cheque, except for the largest businesses

The move will affect an enormous 2.4 million companies, sole traders and employers, HMRC said, with only the largest businesses outside the rules due to the limitations of direct debit.

Currently only 330,000 business – a paltry 13% of the 2.73m businesses registered for PAYE and VAT – use direct debit payments. The scale of this proposal cannot be underestimated.

As part of its digitisation programme HMRC is also getting rid of some of the many paper-based forms used for VAT compliance with a move to online submission options for various VAT items by December.