Time to transform HMRC paymentsby
Modulr's Tom Kelly argues that eliminating the headaches and delays associated with paying HMRC could free accountants up for more valuable work.
After a tough 18 months, accountants have their hands full helping clients rebuild their businesses. The 12 month delay in the implementation of Making Tax Digital for income tax (MTD ITSA) will give the profession time to focus on more immediate priorities, but time is still in very short supply.
While accountants continue to support business recovery efforts, there’s another drain on their resources that too often falls under the radar - paying HMRC.
HMRC payment headaches
If left untouched, HMRC payments can turn into a time-consuming nightmare. The biggest pitfall is the inherent time lag between paying and the payment being processed. For instance, if companies pay by Bacs (an electronic transfer directly from one bank account to another), they need to allow three business days for the payments to be processed. Direct debit payments also take three days to process.
These time lags can lead to allocation issues at HMRC’s end. On top of that, accountants and their clients don’t always communicate effectively when it comes to managing the payment workflow. As a side effect of these issues, HMRC wrote to 1,200 small businesses in the summer demanding unpaid employment taxes accompanied by warnigs of hefty penalties for those businesses that fail to adhere.
The main issue standing in the way of clear communication between accountants and their clients is access to real-time data. By not having up-to-date technology, nor using the cloud to manage ongoing changes and communication about HMRC payments, accountants face lengthy delays. They also end up relying on multiple file versions to transfer payment documents. Not only does this slow the process down and create more work, it also increases the risk of missed deadlines and increases the risks of human errors and fraud associated with manual entry.
Solving the HMRC payments dilemma
So, how do you actually solve this conundrum?
The most obvious answer is adopting an effective payroll solution. Not only does software make the process more efficient, it also lets accountants take the payment workload away from their clients. With time saved managing HMRC payment and payroll workflows, accountants can deliver more strategic, higher value advisory services to their clients.
Another option is Faster Payments, which move funds between customers’ different bank accounts in just seconds – a significant improvement on the three days taken by Bacs. In the first quarter of 2021, 763m payments were processed by the Faster Payments System, a 15% increase on the amount processed in Q1 for 2020
Paying HMRC online by card, by Bacs or by cash or cheque at a bank are really slow by today’s standards and can cause havoc when contending with payment deadlines. If a deadline falls on a weekend or bank holiday, for example, accountants must ensure payments reach HMRC on the final working day before the deadline to guarantee it goes through. And as taxpayers have learned to their cost, missed deadlines can result in substantial fines from HMRC.
With Faster Payments, accountants can pay HMRC within two minutes directly from their chosen payroll software. The simplicity and convenience of this payment method allows last minute transactions to be made without having to worry about penalties for overdue payments.
Let’s stop the nightmare
Paying HMRC shouldn't be a nightmare. Accountants and their clients simply do not have the time to waste on payment delays, nor the spare cash to accommodate hefty penalties. So, while the industry continues to evolve into digital innovation – for example with the introduction of MTD - we need HMRC payments to keep pace. Accountants need effective processes, like Faster Payments, that can streamline and facilitate the recording of all payments so that they can help their clients - and themselves - navigate the changing landscape successfully.