HMRC have published a response to their consultation ‘Making Tax Digital: Voluntary pay as you go'.

The original consultation looked at the options for taxpayers to make and manage voluntary payments, as well as how these would be allocated.

The view of respondents was largely that there would be little interest or no significant take-up of the voluntary payments. The view of most was that businesses would be unlikely to make payments earlier than needed, especially where HMRC were not giving any interest on the balances held.

In their response HMRC have confirmed that voluntary pay as you go will be introduced as part of MTD:

  • HMRC will ensure that it will be made clear that these are optional payments.
  • Taxpayers will not be given the ability to assign voluntary payments to particular taxes themselves.
  • HMRC will allocate the payments according to a set of ‘robust allocation rules’ which will be publicly available and work in the best interests of the taxpayer.

In terms of repayment, HMRC have responded as follows:

  • Safeguards to protect from repayment fraud will be put in place.
  • Repayments requested within 30 days prior a liability falling due will trigger a message for the taxpayer advising them of the liability falling due and the interest and penalty consequences of failing to pay on time: they will be asked if they want to proceed with the repayment.
  • Repayments requested within 7 days prior to a liability falling due will be restricted to the amount exceeding the liability, for taxpayers who do not have 12 months of clean on-time payment history with HMRC.
  • Repayments requested within 30 days prior to a liability falling due will be restricted to the amount exceeding the liability, for taxpayers who, within the last 12 months, HMRC have had to take enforcement action against.
  • Where a repayment of a specific tax overpayment is not claimed after completion of the end of year submission, the overpayment will, eventually, become a ‘voluntary credit’.
  • There are no plans to pay any interest on voluntary payments, but this will be reviewed.
  • Early repayments, i.e. in-year repayments, are better left until MTD is fully embedded.

HMRC also confirmed that partners in a partnership will be able to opt-in to sharing details of suggested voluntary payments with the partnership and they will also ensure that third party payments will be possible, without the need to share any information from the taxpayer’s digital tax account with that third party.

There will be more to come on this area, though HMRC have given no firm indication of whether there will be further consultations or whether they will proceed directly to draft legislation.

Links

Our guide:

Making Tax Digital: index

HMRC’s consultation documents can be found here

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