Speaker, Writer and Business Coach Hudson Business Advice AND Minerva Accountants
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Talking points: HMRC’s payment strategy

20th Jul 2017
Speaker, Writer and Business Coach Hudson Business Advice AND Minerva Accountants
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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.

Burning questions

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.

Electronic payments

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”.

Action points

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.

Replies (5)

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By SteveHa
20th Jul 2017 12:27

I participated in the same webinar, and whilst in agreement to your points, it was the repayments to cards that frustrated me most.

I am aware of no security issues in making repayment by other means, but I can think of several in making repayment back to a card where this is not explicitely requested.

Take, for example, a married woman has a tax liability, which her husband pays using his credit card, and she settles up the credit card bill by cheque for him. In such a case, everyone has paid what they are due to pay.

Husband is found out having several affairs, and a most acrimonious divorce follows. Afterwards, an amendment is made to the wife's Tax Return, a repayment is generated, and HMRC repay back to the, now very much divorced and out of her life ex-husband.

Result, wife out of pocket and husband quids in because HMRC can't think through the consequences.

Thanks (2)
By justsotax
20th Jul 2017 12:57

in a day and age where we are given numerous ways of paying, it seems the revenue want to reduce these to the ones they wish to be paid by.

Thanks (0)
By gilderda
20th Jul 2017 13:03

Another example of HMRC mistakenly believing that everyone is rushing headlong into the digital age?

I have personal tax clients who are way past retirement age, don't even have an email address and who live in relatively remote locations. They pay their tax in full and on time by cheque, simply because this is the easiest way for them to pay.

Much like the ill-conceived and poorly thought out MTD stampede, the removal of the opportunity to do so would put a burden on them to either suddenly acquire some digital skills, or go out of their way just to make life easier for HMRC.

Thanks (1)
By rjoconnor81
20th Jul 2017 16:08

The point about direct debits being their preferred method because the references are correct, goes completely against any experience I have of HMRC allocating PAYE payments. We set the payments up with the correct reference etc, but HMRC then randomly allocate them, sometimes reallocating them from one month to the next and just generally making a pig's ear of it. Even when they are clearly told what it relates to they can't allocate it correctly.

Thanks (3)
Replying to rjoconnor81:
By Charlie Carne
21st Jul 2017 10:49

Agreed. This is indeed a most annoying habit of HMRC and makes reconciling old PAYE debts very hard. As for direct debits, I would love to pay clients' monthly PAYE liabilities by DD, in the same way as they pay VAT; i.e. payment is taken under the DD mandate for the sum filed with HMRC (in the case of PAYE, the sum shown on the FPS). If there are adjustments to the PAYE liability due (eg for SMP etc.), which may require an EPS, then the client could opt out of the DD. But, for many smaller clients, the sum on the FPS is the sum due and they could guarantee to pay their PAYE on time and to the correct reference if HMRC allowed DD mandates. HMRC cannot complain about late and incorrect payments of PAYE if they refuse to implement the simplest system to remove the problem.

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