HMRC’s Payment Strategy – campaigns to encourage electronic payments and repayments

HMRC’s Talking Points for agents on 11 July 2017 provided an interesting insight into HMRC’s Payment Strategy. HMRC established a Corporate Treasury function in April 2016, bringing together Banking and Corporate Finance (Debt Management was moved into Customer Services) and this has led to the development of a single HMRC payment strategy.

 

HMRC is seeking to encourage taxpayers to make payments electronically and to receive refunds by BACS. It wishes to reduce cheque payments made by post and outgoing payable orders, both to reduce its costs and because of the additional security that is provided by electronic transfers together with the greater certainty that payments will arrive by the due date.

 

Payments

Electronic payment has been mandatory for VAT since 2010 and for corporation tax since 2011. This requirement can be satisfied by making a payment with a cheque at a bank, but obtaining payslips has become increasingly difficult. HMRC continues to receive postal payments for VAT (60,000 per annum) and corporation tax (85,000 per annum) and currently accepts these payments even though the payment method in not in accordance with the regulations.

 

There are no current plans for mandatory electronic payment to be extended beyond VAT and corporation tax. However, HMRC has been running campaigns to encourage electronic payment and taxpayers who make postal payments are likely to be contacted by letter and/or phone encouraging them to pay electronically. The messages for VAT and corporation tax will be much firmer than for other taxes where electronic payment is not mandatory.

 

Given these campaigns, this may be an opportune time to consider encouraging those clients who pay HMRC by a cheque in the post to pay electronically, where this is possible. Cheques sent by post are liable to get lost, delayed or intercepted – the Tax Faculty receives periodic reports from members of such incidents.

 

HMRC already receives 92% of payments electronically but is actively working to increase this percentage.

 

Repayments

The subtitle of the presentation was “elimination of payable orders” and this rather alarming term has also been used in letters to taxpayers. HMRC has assured us that it is not, for now, removing payable orders as a method of repayment but its aim is to reduce them as much as possible and to eliminate them gradually over a number of years. This is being done through campaigns and some changes to processes and forms.

 

97% of the 350m payments that HMRC makes each year are made electronically. Of the 8m that are made by payable order, 10% are returned to HMRC uncashed. A payable order costs HMRC up to almost twice as much as a BACS payment.

 

In accordance with payment card industry standards, repayments will automatically be made to payment cards where:

 

  • the most recent payment was made using a card
  • the repayment is no more than the amount of the last payment made
  • the payment was made within nine months of the creation of the repayment.

 

In brief, the way to receive repayments electronically is as follows:

 

  • Self assessment – bank details should be entered on each SA100. The details are not held on the taxpayer’s record or carried forward to future tax years.
  • Corporation tax – bank details should be entered on each CT600. The details are not held on the taxpayer’s record or carried forward to future periods.
  • PAYE – electronic payment can be requested though the Personal Tax Account, bank details are not retained. This functionality was introduced in 2016.
  • VAT – bank details should be entered via the VAT online service or can be provided in writing.
  • Employer refunds – bank details should be provided when requesting the refund or on an EPS where available.

 

Further information can be obtained by listening to the webinar or on the Paying HMRC page on gov.uk. One member has commented that a reason for preferring repayments by payable order is that where HMRC makes a repayment in error the taxpayer can choose not to cash the order – further comments on this would be welcome.

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