Della Hudson takes no nonsense from HMRC when discussing how tax payments and refunds should be made. A modern business should embrace digital payment methods.
Today I learned about HMRC’s strategy on payments by watching their Talking Points webinar. I had lots of burning questions about why the refunds were suddenly haemorrhaging out of the HMRC stone.
Just like my business, HMRC’s strategy is to reduce cheque payments and payment orders. The webinar appeared to start-off on the back foot when 84% of the 150 agents attending indicated that they already knew about the various ways to pay HMRC. If all those agents knew of the alternatives, then surely this isn’t an agent education problem.
Overall HMRC receives 92% of payments electronically, which feels about right after allowing for those with no internet due to location or ability (my practice is based in a semi-rural area, so I have experience of this).
Then I remembered a local accountant whom I had heard fairly recently instructing his clients to pay HMRC by cheque. However, as he doesn’t even use email himself, I was fairly sure that he wouldn’t be signing up for anything as modern as a webinar.
HMRC’s preferred method to receive tax payments is by direct debit. This is so it can control the payment references. I’m mostly in favour of this, as we know that clients tend to pay using the first tax reference they find, and that is not always the correct reference.
Personally, I would love to save the hassle of setting up a PAYE payment to HMRC each month, but my problem is with letting HMRC help themselves to my bank account using a direct debit, based on their randomly generated figures. Some of our clients’ PAYE accounts are already showing bizarre figures which don’t agree to our RTI files.
Part way through the webinar the presenter stated; “HMRC can be trusted” with electronic payments. I’m sorry, but I couldn’t disagree more.
BACS or cheques?
HMRC’s next preference was the speed and security of a BACS or Faster payment where the client controls the amount paid (good) and tax reference (bad), or by any other electronic means.
Cheques paid in at the bank are preferred to cheques posted to HMRC. This last payment method is what HMRC is really trying to discourage. So cheque payments can still be made; just not by post.
When tax refunds are paid out by HRMC they prefer to make the payments by BACS to the taxpayer’s bank account. That’s great, as we try to put client’s bank details onto their SA tax return if they are expecting a refund. However, it is clear from my experience that HMRC is ignoring this section of the SA tax return.
When I asked why there was no acknowledgement that the client had stated a preference for a method of refund payment, I was given some waffle about card security.
In response to a second similar question, the HMRC presenter didn’t appear to be aware that there was an override to the bank details and agreed to “take it away to look at it”.
Educating the taxpayer
As part of its initiative to save the public money, HMRC sent 200,000 “education letters” to taxpayers who committed the heinous crime of paying their tax by cheque, on time, during January.
HMRC asked that agents cascade the information from the webinar to our clients and direct them to the gov.uk website, where they can find out how to pay. We tend to send clients a link to the precise web page, as it is impossible to find the right page when searching.
We were also asked to “reassure [clients] that they can trust the online services when making payments to HMRC”.
At the end of the webinar, a poll showed that only 56% of agents would take any action. I hope that this is because the rest of the agents who attended, like my practice, are already pointing clients towards electronic payments.
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Della Hudson was part of the class of 2009. She built up Hudson Business Accountants and Advisers from her kitchen table to a small team of flexible workers with independent premises in Nailsea, near Bristol. The firm ran regular Money Matters seminars and other training and webinars. Della sold the firm in 2017 in order to focus on the...