ACCA welcomes the opportunity to respond to the consultation issued by HMRC on implementing more timely payment in Income Tax Self-Assessment (ITSA). Our response is informed by insights obtained from a cross section of ACCA UK members. Given the magnitude of the changes, ACCA would have anticipated the proposals to be more developed by this point. However, there is little to indicate that this has taken place. Like feedback on proposals to mandate reporting of transactions between close companies and their participators, ACCA considers the proposals profoundly disconnected from business reality.
We encourage HMRC to think more holistically about the overarching rationale. Do the proposals embody simplicity, certainty, and stability, the three cornerstones of an effective tax system? The same principle applies to the many unanswered questions and different scenarios. For example, do they reduce administrative complexity for taxpayers and agents? How do they contribute to reducing the perceived tax gap? What about the cash flow impacts on small businesses, particularly those at the early stages of development? The same applies to businesses that use employment income until they are further developed.
If HMRC’s objective is to support taxpayers in better managing their ITSA liabilities, ACCA believes greater value can be realised by enhancing the voluntary payment regimes already in place. There are also other cost-effective mechanisms capable of achieving the desired outcome. Given viable alternatives exist, ACCA is most concerned about the administrative burdens that will inevitably arise from creating a system that seeks to cater for all taxpayers. Alongside responses to specific questions, ACCA supplies the following recommendations:
- Remedy disproportionate impacts: Fluctuations in profits make forecasting inherently problematic. ACCA envisages the proposals disproportionately affecting the agricultural, retail, hospitality, and construction sectors. We see elevated risk of potential overpayments or underpayments.
- Flexible budgeting option: Instead of creating a new system based on flawed forecasting, ACCA recommends a Flexible Budgeting Option. This could be linked to Self-Assessment (SA) accounts and pay a commercial rate of interest. We see this as more effective use of HMRC’s limited resources.
- Safeguarding taxpayer fairness: ACCA questions the fairness of treating a group of taxpayers differently on account of receiving employment income. We query the practicality of HMRC accounting for multiple streams of income and, similarly, whether it will result in HMRC issuing multiple tax code updates.
- Transition arrangements: ACCA recommends consideration of other transition arrangements, including basis period reform for barristers. HMRC should scrutinise their effectiveness and explore ways in which they might be replicated.
- Taxpayer confidentiality: Collection of ITSA through PAYE raises significant confidentiality concerns. Regardless of whether an employee wants the information shared, the proposals give employers far more insight into an employee’s personal financial situation.
To read ACCA’s complete comments, please download the document found on this page.
