The ATT has responded to the UK government consultation on timely payment for income tax self-assessment and corporation tax for small companies, which closed on 13 July 2021. The consultation sought views on the proposal to increase the frequency and accelerate the timing of calculation and payment of income tax (outside of the existing regular payment regimes such as PAYE) and corporation tax for smaller companies – in essence, bringing tax payments for small businesses closer to the point where the income or profit arises.
The ATT considers that more timely tax payment should be offered on a voluntary basis only, and not be made compulsory. Bringing forward tax payments may have a negative impact on business cash flow, particularly for those:
who buy stock, especially where there is a gap between purchase and sale of stock;
who are looking to invest in their business and/or incur significant capital expenditure and/or are expanding rapidly;
who receive an unexpected large expense (for example, a bad debt or having to replace or repair essential equipment); and
who are not paid straight away and invoice on credit.
The ATT recommends that HMRC better promotes its budget payment plans before embarking on a wholesale change to the tax system to achieve more timely payments. Individual taxpayers can set up a budget payment plan with HMRC if they want to put aside money to cover their next income tax self-assessment bill.
The Law Society has also responded to HMRC’s consultation. The Society focuses particularly on the impact of the proposal on partnerships and LLPs, given that many law firms are established in this way, and highlights additional compliance and complexity arising from issues such as: working capital funding; allocation of profits and charges; calculation of double tax relief; partnership charges and personal allowances and reliefs; calculation of partnership profits; preparation of tax calculations for individual partners; and joiners and leavers.
The Law Society recommends HMRC considers the above impacts on partnerships and LLPs for any further policy developments in this area.
The ATT has responded to the UK government consultation on timely payment for income tax self-assessment and corporation tax for small companies, which closed on 13 July 2021. The consultation sought views on the proposal to increase the frequency and accelerate the timing of calculation and payment of income tax (outside of the existing regular payment regimes such as PAYE) and corporation tax for smaller companies – in essence, bringing tax payments for small businesses closer to the point where the income or profit arises.
The ATT considers that more timely tax payment should be offered on a voluntary basis only, and not be made compulsory. Bringing forward tax payments may have a negative impact on business cash flow, particularly for those:
who buy stock, especially where there is a gap between purchase and sale of stock;
who are looking to invest in their business and/or incur significant capital expenditure and/or are expanding rapidly;
who receive an unexpected large expense (for example, a bad debt or having to replace or repair essential equipment); and
who are not paid straight away and invoice on credit.
The ATT recommends that HMRC better promotes its budget payment plans before embarking on a wholesale change to the tax system to achieve more timely payments. Individual taxpayers can set up a budget payment plan with HMRC if they want to put aside money to cover their next income tax self-assessment bill.
The Law Society has also responded to HMRC’s consultation. The Society focuses particularly on the impact of the proposal on partnerships and LLPs, given that many law firms are established in this way, and highlights additional compliance and complexity arising from issues such as: working capital funding; allocation of profits and charges; calculation of double tax relief; partnership charges and personal allowances and reliefs; calculation of partnership profits; preparation of tax calculations for individual partners; and joiners and leavers.
The Law Society recommends HMRC considers the above impacts on partnerships and LLPs for any further policy developments in this area.
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