Business owners could face fines even when they pay their PAYE and VAT in full and on time, simply for using the wrong payment channel, under new rules being consulted on by HMRC.
The government is seeking views on plans to require businesses to pay their PAYE and VAT return liabilities by Direct Debit, with the aim of reducing late payment, limiting the flow of debt and simplifying the payment process to cut errors. The consultation runs until 16 August 2026.
Responses from the business community and tax agents will, HMRC says, help determine the scope of any changes, whether safeguards are needed, and which taxpayers should be excepted from the requirement. The Institute of Chartered Accountants in England and Wales notes that exceptions are proposed for those without UK bank accounts, the digitally excluded and payments above £20 million.
The sting, however, is in the enforcement. If Direct Debit becomes mandatory, a penalty could apply where a payment is made through another channel, even if the tax is paid in full and on time. That has raised eyebrows among accountants and business owners, not least because late payment already carries interest and penalties under the existing regime.
Harvey Dhillon, founder and chief executive of small business accountants Zmartly, said the underlying move was, “for once, a sensible fix”.
Support authors and subscribe to content
This is premium stuff. Subscribe to read the entire article.
