New year, new tax challenges

Jason Piper is a senior manager in tax and business Law at the Association of Chartered Certified Accountants Jason Piper is a senior manager in tax and business Law at the Association of Chartered Certified Accountants

January is always a good time to look ahead and make plans and HMRC is doing its bit to assist firms in that regard. With a raft of announcements in the November Budget there are a number of proposals that, when implemented, will affect how a business runs its tax affairs from 2018, writes Jason Piper.

However, with some judicious feedback into HMRC, it may be possible to shape how the proposals are implemented. Experience has shown that HMRC does listen.

Compliance penalties

Based on consultations the government is reforming the penalty system for late or missing tax returns; soon there will be a new points-based approach in place. The details are here, (, but in essence penalties will start to accrue on annual returns after two defaults, for quarterly returns after four defaults and for monthly returns after five. To reset the score to zero you need to make two, four or six submissions on time for each return type respectively. Scores run independently for each type of tax.

Alongside this, the government ‘will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments’.

Grace periods

Proposals at include a suggestion that penalties for tax paid late should be like a parking fine and halved for prompt payment with a 14-day grace period where no penalty will arise at all.

Interest rates would change and the existing VAT surcharge model would be replaced but one of the conditions to get a penalty reduced is that if you can’t pay, you will have sought to finalise a ‘time to pay’ arrangement with HMRC. If this can be done within 14 days there will be no penalty, if completed within 28 days the penalty will be cut by 50%.

Operating PAYE

Since May 2017 you may well have noticed an uptick in the number of PAYE codes you’ve been receiving for employees – and perhaps the number of queries from them that you’re having to field. This is all a part of the new system of ‘dynamic coding’ ( which aims to use the information that HMRC is gathering from various different sources to estimate an individual’s total annual income, and from that work out what their final tax bill is going to be and adjust things on the fly accordingly. However, based on results so far, the system is struggling with irregular amounts like bonuses, commission or variable pay – let alone dividends or income from overseas.

The solution to many of these problems associated with dynamic coding lies not with HMRC or the employer, but with the employee. Like it or not, the easiest way to resolve the issues is for employees to activate their Personal Tax Account (PTA) – see - so that they can check the amounts charged for themselves.

With the constant fine-tuning of liabilities, HMRC has created a model where employers will be getting code updates far more frequently and that’s something which in the short term is going to prompt more queries from employees. And whatever HMRC might suggest about the PTA, individuals are still going to query their affairs with their employer if they notice that their monthly payslip has a smaller ‘net payment’ on it.

Faster tax debt recovery

But there’s another change that few seem to know about. With the announcement of ‘Faster recovery of Self-Assessment debt’, HMRC will be using technology to recover additional self-assessment debts closer to real-time by adjusting the tax codes of individuals with PAYE income. This change will take effect from 6 April 2019 – see

To conclude

Quite simply, unless you want to be burdened with whatever HMRC gets passed, you need to feedback into the process. You’re unlikely to stop it but you may be able to shape how the proposals are implemented.

Comments can be sent to HMRC via, ideally by 2 March 2018.

· Jason Piper is a senior manager in tax and business Law at the Association of Chartered Certified Accountants

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