UK and International Tax news

HMRC Consults On Timely Payment Of Tax

Wednesday 31st March 2021

Included in the Government’s publication of Tax Policies and Consultations (Spring 2021) on 23 March was a call for evidence on the timely payment of tax.

In July 2020, the Government announced its 10-year tax administration strategy. This sets out how HMRC will make sure tax administration keeps up with the rapid changes taking place in society, the economy and technology to deliver the flexible, resilient and responsive tax system the UK will need in the years ahead.

HMRC has now launched a call for evidence on the timely payment of tax, covering the benefits and challenges of the current tax payment timings, and for moving to more frequent, in-year tax calculation and payment.  It focuses on income tax self assessment outside of PAYE and corporation tax for companies outside the quarterly instalment regime.

At the heart of the Government’s vision is a tax system that works closer to real time.  Where possible, it will seek to use digitisation and modernisation to simplify processes and ease impacts on taxpayers. Delays currently present in the UK tax system can make it hard for people to manage their cashflows, particularly for the newly self-employed, whose first tax bill could be up to 22 months after they start trading. This can lead to taxpayers getting into debt, causing stress and difficulties for them, creating additional cost for HMRC to manage, and contributes to the non-payment tax gap.

The Government points out that many countries are already operating with, or considering the introduction of, modern, digital tax regimes that bring tax payment closer to earning the income, and it considers that it is important for the UK to keep pace.

However, the Government recognizes that alteration to the timing of tax payments would be a major change. It also recognizes that many businesses are struggling at the moment due to the economic impact of the coronavirus outbreak. For that reason, it has no intention to make significant changes to the timing of income tax or corporation tax payments within the present parliament. If change happens, it will be reforming and not revolutionary, gradual, structured over the longer term, and carried out in close collaboration with stakeholders.

The consultation seeks views on the policy design and any suitable possible alternatives, before consulting later on a specific proposal for reform. HMRC have included 45 questions on principles, the current tax payment regimes, the benefits and challenges of more frequent payment, and cash flow impacts.

Responses have been requested by 13 July 2021.

If you would like further information on the consultation, please contact Keith Rushen on 0044 2074862379.


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