Could the current tax payment timings change?

Millions of taxpayers in the UK could face earlier tax payments as part of the Government’s 10-year strategy to build a “trusted, modern tax administration system”.

Due to the challenges of the current tax-payment timings, it is considering bringing tax payments “closer to real-time”.

A Government spokesperson revealed that it is focusing on Income Tax Self Assessment and Corporation Tax for companies outside of the quarterly instalment administration.

However, the change applies to all that pay Income and National Insurance Contributions (NIC) outside the payment administrations, such as Pay As You Earn (PAYE). Along with those in Corporation Tax Self Assessment that are not within the quarterly instalment payment administration.

This proposal comes as HM Revenue and Customs launched a discussion on 23 March 2021 on bringing income and corporation tax payments closer to the point when the income arises.

Jesse Norman, the Financial Secretary present at the discussion said, “The delays that are at present inherent in the UK tax system can make it hard for people to manage their cash flow. Particularly for the newly self-employed, whose first tax bill could be up to 22 months after they start trading.

“They can thus lead to taxpayers getting into debt, which causes stress and difficulties for them, creates additional cost for HM Revenue and Customs to manage, and contributes to the non-payment tax gap, taking away revenues needed to support public services.”

In the discussion, the Government recognised that changing the timing of tax payments would ignite a “major change”, and is aware that many businesses are still coping with the economic impact of COVID-19.

Therefore, Norman said the Government will not make significant changes to the timing of Income or Corporation Tax payments “within the present parliament”.

“If a change happens, it will be reforming and not revolutionary: gradual, structured over the longer term, and carried out in close collaboration with stakeholders,” he ended.

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