This Making Tax Digital (MTD) consultation proposes that those with a digital tax account will be able to make regular voluntary payments to HMRC. The proposal is that individuals and businesses will be able to make voluntary payments to offset their tax liabilities through the online digital account. HMRC state that the overarching guiding principles will be that the making of voluntary payments will be flexible; the administration will be simple for the customer and HMRC; HMRC will allocate voluntary payments against tax liabilities as they become due; voluntary payments will be repayable; and payments and repayments will be made electronically.
The making of voluntary payments will be flexible
The intention is that there will be no requirement to make voluntary payments. However you may have to elect to make these payments in order to help HMRC identify and treat the payments correctly. An election will not, in itself commit the customer to make a payment.
The administration will be simple for the customer and HMRC
HMRC say that it will be a simple, flexible and easy to use system. The intention is that customers will want to use this system to smooth payments throughout the year and these payments will have a greater degree of certainty rather than one lump sum payment.
HMRC will allocate voluntary payments against tax liabilities as they become due
The voluntary payment will offset against the next available tax liability. The aim is to have a clear integrated view of all taxes, what liabilities are due and how the credits on your account will offset these liabilities.
Voluntary payments will be repayable
Repayments of voluntary payments will be possible if the monies are required for, say, short term cash flow issues. The only exception is where a statutory payment date is coming due. How long this lead in time will be has yet to be confirmed.
Payments and repayments will be made electronically
The proposals also discuss linking directly to online banking applications to streamline the process. The possibility of introducing facilities to allow direct debit payments is also discussed.
Payments on Account (POA)
HMRC note that there is a conflict between payments required by the payments on account rules (50 percent of the previous year’s liability) and the real time information submitted via quarterly updates. There will almost certainly be a discrepancy between the current year estimate and the POAs which may confuse taxpayers. HMRC are therefore looking at changing the POA rules to better reflect MTD quarterly updates but detail is scant at this stage.
Currently if a customer overpays tax this gets refunded back to them. Under these proposals the customer can elect to treat this overpayment as a voluntary credit which will be offset as discussed above.
The closing date for responses to this consultation is 7 November 2016.
Please contact us using the details below if you would like any further information on this consultation or our response.
+44 20 73115709
+44 20 73114330