25 09 2018

Government Publishes New Proposals for Early Payment of Tax

RSM's Andrew Hubbard looks at government plans to force people to pay tax more quickly.

Everybody in business knows the expression 'Turnover is vanity, profit is sanity and cash flow is king'. What is true of business is also doubly true for government.

Most government accounting is on a cash basis and therefore getting in cash is critical to having money to spend on public services. As most of that cash comes from tax revenues it is not surprising to see HMRC looking at more and more ways to bring forward the time that tax is payable.

When I first started in tax almost all business tax payments (other than PAYE/NIC and VAT) were payable many months (sometimes years) after they were earned. Now most large companies pay tax on a quarterly basis. Next year the very largest will see further acceleration of their tax payment dates.

The draft Finance Bill published last week contains further proposals to bring forward the payment of tax. From 2020, individuals disposing of residential property which does not qualify in full for main residence relief will be required to pay capital gains tax within 30 days of completion and non-residents will have the same payment deadline for all disposals of UK property. More details are to be announced on how the rules will apply to companies.

Stamp Duty Land Tax is an increasing source of revenue for HMRC and the current 30-day payment deadline will be reduced to 14 days for disposals on or after 1 March 2019. That is an odd date and the cynic in me wonders whether it was chosen with an eye on the government’s financial year of 31 March.

The new date will bring in another two weeks or so of SDLT receipts into the 2018-19 accounts. On my back of the envelope calculations that brings another £496m tax revenue into the current year! All without doing anything to the tax rates themselves.

Where will this all end? I can see a time not many years from now when virtually all taxes will be paid in something close to real time. Technology has made this possible in a way which would have been unthinkable even 10 years ago. There is an enormous amount of cash tied up in businesses which has been collected and not paid over (think about the PAYE and NIC held by employers between pay day and the due date for PAYE). I suspect that each year a bit more of this tax cashflow will end up in the government’s hands a little earlier. You can see Chancellors drooling over the prospect of getting their hands on all of that additional tax.