If the new government wants to raise tax receipts without raising rates, could changes to payment due dates provide the answer? Andrew Hubbard (Baker Tilly) explains.
The government accounts on a cash basis, so whenever tax payment dates are shifted forward there is an immediate positive impact on the tax receipts: in theory this is only a timing difference, but while the UK’s accounts are drawn up on a going-concern basis, then in effect it gives a permanent one-off boost to the government’s income. So I will be watching out for announcements about changes in the due date for tax payments.
Take, for example, income tax self-assessment. In round figures, £23bn is collected via self-assessment. Of this probably two thirds is paid after the year end. So a shift to bring all of this onto a current year basis would increase tax receipts by something like £15bn. As the government has committed not to raise tax rates, it might well see a change to tax payment dates as a very convenient substitute. If the same were to be repeated for CGT and corporation tax, there is even greater potential for boosting receipts.
I’m not expecting an immediate change, but I don’t think it will be long before we start to see a shift. When I started my career (and it was not that long ago...), the gap between earning the profits and paying tax on them could easily be at least 18 months and for many taxes nothing was payable until the taxman got round to issuing an assessment – which sometimes took years. I suspect that by the time that I retire, almost all taxes will require monthly payments on account, with perhaps a small catch-up charge at the end of the year. You have been warned!
Andrew Hubbard, Baker Tilley (Baker Tilly's Weekly Tax Brief)
Home >Articles > The secret to increased tax collection? Timing
The secret to increased tax collection? Timing
If the new government wants to raise tax receipts without raising rates, could changes to payment due dates provide the answer? Andrew Hubbard (Baker Tilly) explains.
The government accounts on a cash basis, so whenever tax payment dates are shifted forward there is an immediate positive impact on the tax receipts: in theory this is only a timing difference, but while the UK’s accounts are drawn up on a going-concern basis, then in effect it gives a permanent one-off boost to the government’s income. So I will be watching out for announcements about changes in the due date for tax payments.
Take, for example, income tax self-assessment. In round figures, £23bn is collected via self-assessment. Of this probably two thirds is paid after the year end. So a shift to bring all of this onto a current year basis would increase tax receipts by something like £15bn. As the government has committed not to raise tax rates, it might well see a change to tax payment dates as a very convenient substitute. If the same were to be repeated for CGT and corporation tax, there is even greater potential for boosting receipts.
I’m not expecting an immediate change, but I don’t think it will be long before we start to see a shift. When I started my career (and it was not that long ago...), the gap between earning the profits and paying tax on them could easily be at least 18 months and for many taxes nothing was payable until the taxman got round to issuing an assessment – which sometimes took years. I suspect that by the time that I retire, almost all taxes will require monthly payments on account, with perhaps a small catch-up charge at the end of the year. You have been warned!
Andrew Hubbard, Baker Tilley (Baker Tilly's Weekly Tax Brief)
