The ATT made the warning in its response to a Government consultation on bringing payment under Income Tax Self-Assessment (ITSA), and Corporation Tax (CT) for small companies, closer to the point where the income or profit arises.
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"A voluntary system allows those businesses who would stand to benefit from earlier tax payments to do so, without imposing potential cash flow issues or extra administrative burdens on those businesses for whom it would provide no advantage and who wish to continue to pay on the current basis.
“Many businesses are experiencing tough economic conditions because of the pandemic and possibly because of the fallout of Brexit. This is not the time to make decisions on changing payment timings. In that light, we welcome the Government’s commitment to not make any change ‘within this parliament’.”
Budget Payment Plans
ATT is urging HMRC to better promote its largely unknown and unused Budget Payment Plans before embarking on a wholesale change to the tax system to achieve more timely payments. It also calls for this provision to be made available to small businesses as well as individuals.
Individual taxpayers can set up a budget payment plan with HMRC if they want to put aside money to cover their next income tax self-assessment bill. This is different from income tax payments on account, which individuals normally make once every six months towards their next tax bill. The budget payment plan lets individuals decide how much to pay each week or month and stop paying for up to six months. But individuals must be up to date with their previous self-assessment payments before they set up a plan.
Jon Stride said: “HMRC already have a facility for income taxpayers who want to make regular payments in advance, it is just that hardly any taxpayers know about it or are made aware of it by HMRC. The low take-up may also be due in part to the lack of flexibility in requiring regular payments to be made.
“We would recommend HMRC expand this offering so that it is available to small companies as well as individuals and so that it allows taxpayers to choose to make payments as and when they are able, rather than requiring a regular contribution.”
Quarterly
If the Government pushes ahead with making more timely tax payments compulsory, the ATT cautions that if the frequency of tax payments were to be increased, payments should not be required more often than quarterly.
Jon Stride said: “We are against a move to more frequent payments on a compulsory basis on the grounds that it will be overly onerous for most taxpayers. If the Government insists on pushing ahead with it, then we consider that a move to a quarterly payment frequency would be the least worst option. This would at least achieve some sort of balance between assisting businesses with cash flow and minimising administrative burdens."
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Susie Hughes © Shout99 2021
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