𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

British firms that pay their tax in full and on time could be fined for choosing the wrong way to pay under plans now sitting on the Chancellor’s desk.

Taxmen now want Direct Debit to become the default way for businesses to pay VAT and PAYE, letting HMRC yank cash straight from bank accounts on the day it falls due.

Anyone paying via a traditional bank transfer would have to ask for an exemption or risk a penalty, even if every penny arrives on time, Conservatives say.

Analysis shows an estimated 2.4 million employers, sole traders and companies will be caught in the Treasury snare.

Chancellor John Healey is rumoured to be weighing up the plan ahead of his very first Budget this Wednesday.

That is despite HMRC’s own consultation stating bluntly that a penalty “could apply even if the payment is otherwise made in full and on time”.

A dossier seen by this paper reveals officials ask whether firms should be fined “on each occasion a payment is not made by Direct Debit”.

Yet the same document concedes “most taxpayers pay in full and on time”, and that late payment “is often linked to oversight”.

HMRC cannot say how much the scheme would raise. Its estimate of the cash impact is blank for every year, marked “yet to be confirmed”.

Firms could even be stripped of the extra days they get for paying electronically. That would drag the PAYE deadline for bank transfers back from the 22nd of the month to the 19th.

Experts have lined up to savage the plan. The Institute of Financial Accountants said it “strongly objects” to fining firms that have already paid on time.

Speaking at the time, Jon Stride, of the Association of Taxation Technicians, said such businesses “should not be penalised simply because they choose a different payment method”.

Even UK Finance, which speaks for the banks, told HMRC it “has not demonstrated that mandatory Direct Debit is a proportionate response”.

Shadow Chancellor Andrew Griffith said: “Penalising hard-working people for paying their tax on time is a new low from Labour. HMRC should not be allowed to directly raid bank accounts by default.

“Labour’s dire management of the economy has meant they are once again approaching the Budget looking for new ways to raid the public so they can bankroll more benefits handouts.”

Treasury minister Dan Tomlinson told Parliament in July that “no decisions have been taken” on any future enforcement regime.

An HMRC spokesperson said: “We launched this consultation so we could listen to the views of businesses and other stakeholders, as our aim is to reduce admin and debt caused by late payments and errors. All responses are being considered before the government makes any decisions.”