HMRC’s recognition of the challenges is a positive step. Accelerating payments can create cash flow challenges, particularly for taxpayers with irregular or volatile income and businesses experiencing delays between recognising profits and receiving payment. The Government’s stated objectives are to make budgeting easier and limit the accumulation of unpaid tax. Whether those objectives are realised will depend, in part, on the instalment timetable and how readily taxpayers can revise their estimates.
Of greater concern is a lack of detail in the document on particularly affected taxpayers. We expect certain groups of taxpayers to be significantly impacted, including partnerships where the firm will often make and manage Self Assessment tax payments on behalf of partners, and high net worth individuals who, from 2029, will need to maintain sufficient liquid assets to make automated payments as they fall due. Furthermore, there is no reference to specific challenges for the Private Equity sector where, for example, the profile of carried interest returns reflects investment volatility.
The option to update payments online reflects concerns raised in KPMG’s response about estimates becoming misaligned with actual income. Similarly, concerns that were also raised regarding PAYE collection has led to this approach becoming an option, rather than the requirement, for taxpayers with sufficient PAYE income. Regrettably, the announcement does not provide an indication on the approach to late payment interest and penalties where payments are late or are insufficient as a result of estimated income figures. The need to consider this is, at least, recognised.
In 2029/30, taxpayers will face an overlap between settling the outstanding amount for the preceding tax year and funding instalments for the current year under the revised regime. The resulting cash flow demands will therefore need to be factored into their preparations. The Government has indicated that explanatory material and practical assistance will be available, alongside arrangements to spread payments. Those experiencing financial difficulties are advised to approach HMRC at an early stage.
