ICAEW.com works better with JavaScript enabled.

Building a better tax system for the UK

In-year tax estimates wouldn’t be an accurate basis for payment, warns ICAEW

Author: ICAEW Tax Faculty

Published: 13 Jul 2021

ICAEW considers HMRC’s call for evidence on timely payment to be premature, as earlier payment of income and corporation tax would reduce businesses’ flexibility to manage their cashflow and in-year tax estimates would not be a reliable basis for payment for most taxpayers.

HMRC has been seeking information on the opportunities to reform its processes for tax payments and repayments, as well as how payment of tax might be moved closer to the time that income is earned.

The issues are examined in its consultation on the Tax Administration Framework Review (in Chapter 4) and in a separate call for evidence on timely payment of tax liabilities.   

In its response to the latter, published as ICAEW Rep 66/21, ICAEW argues that earlier payment of income and corporation tax should not be considered until the economy has recovered from the impact of the coronavirus pandemic; the reassurance that no changes will be made during the current parliament does not allay concerns.

ICAEW is particularly concerned at the suggestion that earlier payment should be based on in-year estimates without HMRC first demonstrating that they can be a reliable basis for earlier payment. It is far from clear that accurate in-year estimates could be possible without imposing significant administrative burdens on taxpayers.

If the government wishes to address the tax gap arising from non-payment other options are available and should be explored. These include changing payment on account rules or changing the due dates within the current regime, along with the promotion of voluntary payments on account. A voluntary system would be welcomed by some taxpayers with very simple affairs.

The administration of payments

In its response to HMRC’s consultation on the Tax Administration Framework Review (ICAEW Rep 65/21), ICAEW highlights that significant benefits could also be realised if HMRC were to improve the presentation of information on amounts due by taxpayers both online and in paper outputs. In particular, ICAEW suggests that including displaying all amounts due in one place with full account history information.

ICAEW also highlights a number of practical problems such as misallocation of payments by HMRC, confusing payment references and delays to repayments. It calls for taxpayers to have greater flexibility to offset repayments due against amounts payable

ICAEW does not consider harmonisation and alignment of payment rules across different taxes to be a priority at this stage, except where taxes are assessed together (eg, income tax, national insurance and capital gains tax).   

Read more on ICAEW's response to TAFR

Tax Faculty

This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.