Government plans to force businesses to pay VAT and PAYE liabilities by direct debit will strip firms of cash flow control and risk escalating administrative errors, the ICAEW has warned.
In its response to a government consultation, the institute said the proposals to automate tax collection would remove crucial payment safeguards for employers while exposing businesses to inaccurate collections caused by flawed HMRC data.
The organisation highlighted existing operational issues within the tax authority, including misallocated payments, untracked figure adjustments, and discrepancies on internal dashboards, alongside practical hurdles such as software reference incompatibility and BACS payment caps.
The institute also urged the government against imposing penalties on businesses that do not adopt Direct Debits, recommending instead that existing late-payment penalty regimes and support arrangements be maintained.
Adelle Greenwood, tax technical manager at the ICAEW, said: “While we fully support measures to simplify the tax system and reduce the administrative burden and costs to businesses, we do not believe this measure to mandate payments by direct debit would achieve either of these goals. It’s unsurprising that businesses and employers are opposed to HMRC having the ability to automatically collect payments from their accounts as they need to maintain control over their cash flow and processes.
“HMRC acknowledges that most taxpayers already pay in full and on time, and only a minority submit tax returns by the deadline but make payments late. Consistent late payers may be encouraged to make use of the direct debit option, where it would resolve operational issues, but imposing a direct debit scheme for all VAT-registered businesses and employers is a disproportionate response.
“For many businesses this would mean significant changes to their approval and authorisation processes and remove the autonomy they have to manage their cash flow and transfers of funds internally.”
Government plans to force businesses to pay VAT and PAYE liabilities by direct debit will strip firms of cash flow control and risk escalating administrative errors, the ICAEW has warned.
In its response to a government consultation, the institute said the proposals to automate tax collection would remove crucial payment safeguards for employers while exposing businesses to inaccurate collections caused by flawed HMRC data.
The organisation highlighted existing operational issues within the tax authority, including misallocated payments, untracked figure adjustments, and discrepancies on internal dashboards, alongside practical hurdles such as software reference incompatibility and BACS payment caps.
The institute also urged the government against imposing penalties on businesses that do not adopt Direct Debits, recommending instead that existing late-payment penalty regimes and support arrangements be maintained.
Adelle Greenwood, tax technical manager at the ICAEW, said: “While we fully support measures to simplify the tax system and reduce the administrative burden and costs to businesses, we do not believe this measure to mandate payments by direct debit would achieve either of these goals. It’s unsurprising that businesses and employers are opposed to HMRC having the ability to automatically collect payments from their accounts as they need to maintain control over their cash flow and processes.
“HMRC acknowledges that most taxpayers already pay in full and on time, and only a minority submit tax returns by the deadline but make payments late. Consistent late payers may be encouraged to make use of the direct debit option, where it would resolve operational issues, but imposing a direct debit scheme for all VAT-registered businesses and employers is a disproportionate response.
“For many businesses this would mean significant changes to their approval and authorisation processes and remove the autonomy they have to manage their cash flow and transfers of funds internally.”
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It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution
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