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Paying taxes is a low priority for businesses and individuals who struggle with cash flow, according to the results of an HMRC survey
The study – entitled Late Payment of Tax: Motivations & Sanctions – was carried out on behalf of the Revenue by research company Ipsos MORI.
It found that people and firms who get into tax-debt do so because funds are unavailable after they have honoured what they perceive as more important bills: a delay in paying taxes is seen as preferable to a delay in paying suppliers and members of staff.
The survey’s newly published results show that cash flow is a cause for concern particularly when it comes to paying taxes that are paid quarterly, bi-annually or annually, because such levies do not mirror the way payments are made for non-tax transactions (i.e. monthly).
The participants in the study were individuals and businesses of various sizes that were late payers of taxes and, therefore, were on the taxman’s records as recently having owed a tax-debt.
They said they felt that HMRC are inflexible and do not understand the needs of business. The department is not felt to be responsive to the circumstances in which the participants find themselves, and little support is provided to make paying back a debt easier.
There is also fear among participants of HMRC based on the legacy enforcement powers of Customs and Excise, particularly in relation to VAT. This perception means some businesses make it a priority to pay VAT over other taxes.
The research also found cases in which poor administrative practices had led to debt: either because a party did not know how to complete tax documentation or was not willing to follow the procedures required.
Participants recognised that a system of interest and penalties for non-payment of tax is necessary in order to ensure that all taxpayers are treated fairly, but sanctions should be clear, transparent and based on correct information.
Participants appreciated being forewarned about any action to be taken against them with respect to unpaid taxes.
Many of the parties interviewed welcomed proposals to allow the payment of more taxes on a more regular basis, paying smaller amounts more frequently making it easier for businesses and individuals to budget.
