ATT warns against penalising businesses that pay tax on time
The Association of Taxation Technicians (ATT) has urged HMRC against introducing measures that would penalise businesses that pay the correct amount of VAT and PAYE on time simply because they do not use a direct debit.
Responding to an HMRC consultation on requiring VAT and PAYE liabilities to be paid only through direct debit agreements, the ATT argues that HMRC have not provided sufficient evidence to justify the approach, warning it could lead to compliant businesses facing unfair sanctions despite paying their tax liabilities in full and on time.
The Association also questions whether HMRC has demonstrated that the choice of payment method is a significant cause of late payment or tax debt. The ATT's response highlights that many businesses deliberately manage the timing of tax payments as part of their cash-flow processes, and expresses concern that mandatory direct debits could impose additional burdens and uncertainty on compliant taxpayers while delivering limited benefits.
The ATT noted that the consultation did not set out how HMRC would handle the collection of VAT and PAYE payments where disputes were raised over the amount due, or how they would ensure that Time to Pay arrangements were processed before HMRC collected the full liability due via direct debit.
Jon Stride, chair of the ATT’s Technical Steering Group, said:
"Businesses that pay the correct amount of tax on time should not be penalised simply because they choose a different payment method to what HMRC would prefer.
"The consultation does not provide evidence that mandatory direct debit is the most effective or proportionate way of addressing late payment. Most businesses already pay their VAT and PAYE liabilities accurately and on time using existing electronic payment methods, in line with existing incentives for doing so.
"Before considering penalties, HMRC should be able to demonstrate that non-direct debit payment methods are a significant and direct cause of late payments, and show why less intrusive measures, such as improving awareness and encouraging voluntary uptake, would not achieve the same objective."
The ATT also argues that targeted interventions aimed at persistent late payers would be more proportionate than imposing a blanket requirement on all businesses.
The Association does not support a separate penalty regime based solely on payment method where the correct amount of tax has been paid on time, arguing that existing late payment penalties already address non-compliance.
Notes for editors:
- ATT consultation response: Requiring payment of VAT and PAYE return liabilities by Direct Debit.