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Payments, Repayments and Debt – HMRC consults further on payment schemes and compliance
Monday, December 8th, 2008
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HMRC consulted on a package of proposals for its approach to payment, repayment and debt in June 2007. This resulted in legislation in the Finance Act 2008 for three of the proposals, namely,
- to align and modernise HMRC powers to seize and sell goods to satisfy tax debt and to take action for debt in the courts
- to allow HMRC to set repayments due to taxpayers against what is owed by the taxpayers
- to enable HMRC to accept payment by credit card and pass on the associated transaction fee.
HMRC has now published a further consultation that seeks further views on a number of proposals. Some taxpayers get into arrears because they are not able to meet their obligations when they fall due. HMRC expects those who need further time to pay to make contact before the debt becomes due. Under existing provisions, HMRC will consider whether it is appropriate to reschedule the debt due by a ‘time to pay’ arrangement (TTP). This arrangement is not a right to delay payment in all cases, but a pragmatic solution in specific circumstances.
A TTP arrangement is an agreement to pay a liability by more than one instalment later than its due and payable date, over a longer period than a simple short-term promise to pay. The main feature is that the debtor commits to make regular payments to pay off the debt over a reasonable time. Provided those regular payments are made as agreed, HMRC will take no further recovery action.
The June 2007 consultation suggested that schemes to allow more flexible payment options than the TTP arrangement would help individuals and businesses manage their finances better and to budget to meet tax bills. Accordingly, HMRC proposes to proceed with some form of payment instalment scheme and welcomes further views. Of the two schemes suggested in the earlier consultation, HMRC’s preference is to allow individuals within Income Tax Self Assessment and Corporation Tax Self Assessment to make a series of monthly payments by means of
- Budget Payment Plans, where all the tax is paid by the due date, or
- Managed Payment Plans, where half of the tax is paid by the due date and half is paid after it.
Use of the plans would be voluntary and agreed monthly payments would be taken by direct debit. The plans would apply only to individual taxpayers required to pay bi-annually under self assessment and could not, therefore, apply to employer monthly or quarterly payments of PAYE tax and NICs.
Other proposals in the consultation document are:
- to extend existing arrangements for collecting small underpayments of income tax by means of adjustments to the employee’s tax code, with appropriate safeguards
- to allow HMRC to claim legal costs when court action is necessary to recover debts
- where a debtor has gone missing in order to avoid payment of debts, to enable HMRC to contact companies and others who have recently acted for the debtor in a business or professional capacity, requiring this third party by law to provide the necessary contact information
With regard to non-payment or late payment of PAYE tax and NICs by some employers, HMRC is giving consideration to extend existing powers to require taxpayers with poor payment records, such as directors who, in order to avoid paying HMRC debts, repeatedly declare their businesses insolvent and then create new companies, to provide a sum of money that is held as security against future debts. Current legislation does not allow the payment of securities in this way to be used in connection with direct taxes such as PAYE. Views on extending these provisions to direct taxes are sought in the consultation document.
The deadline for responses is 13 February 2009
Further information:
Payments, Repayments and Debt: The Next Stage
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