Making Tax Digital is coming! With HMRC issuing detailed consultation documents in August 2016, we continue to look at the changes and impacts.
The voluntary pay as you go (PAYG) scheme will give businesses the opportunity to budget towards their tax bills and will prove attractive provided the method is flexible and straightforward.
What is changing?
- Voluntary pay as you go payments are effectively amounts that a business chooses to pay towards an expected liability.
- Customers can decide how often and what amount they want to pay to voluntary PAYG. Payments will not be fixed or at regular intervals so customers can retain control.
- Customers can make voluntary payments at the point they submit their update and when their digital account is being updated with actual and estimates of their tax liability.
- When businesses start to update HMRC regularly through their digital tax accounts, they and their agents will be able to see their estimated liabilities – paid, outstanding or becoming due.
- Voluntary payments will sit on the customer’s digital account as a credit and be allocated against liabilities as they become due.
- There will be a repayment of voluntary payments option if the customer needs to access their money for any reason.
- Payments and repayments will be made electronically.
- Another option would be for the customer to enter a regular commitment, where a direct debit arrangement would be set up.
Why is it changing?
Under voluntary PAYG businesses will be able to set aside money, ensuring there are no problems meeting liabilities, helping to improve cash flow and reducing exposure to any late payment penalties or interest charges.
Being able to choose how much they pay and how frequently they make payments to HMRC reduces risks of missing payment obligations.
Who will this affect?
- Businesses, self-employed and landlords who are keeping their records digitally and providing regular updates to HMRC.
- This will also be of interest to agents, business representative bodies, software developers and insolvency practitioners.
What is the impact?
Certain parameters will be put in place to prevent improper use of the repayment facility such as money laundering.
Voluntary payments is likely to have a positive impact on the cost of debt to HMRC.
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Added by Jon Davies
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