Section 111: Managed Payment Plans
Summary
1.Section 111 provides for HM Revenue & Customs (HMRC) to introduce managed payment plans.
2.Under these voluntary plans, taxpayers may pay income tax or corporation tax due under Self Assessment by instalments balanced equally before and after the normal due dates. While in the plan, taxpayers are protected from the interest and penalty consequences on payments made after the normal due date. The section applies throughout the United Kingdom.
Details of the Section
3.Subsection (1) provides that managed payment plans are available in respect of income tax or corporation tax payments that must be made under Self Assessment. These are payments on account of income tax payable in accordance with section 59A of the Taxes Management Act 1970 (TMA); payments of income tax and capital gains tax payable in accordance with section 59B of TMA; and payments of corporation tax payable in accordance with section 59D of TMA. The scope of section 59D of TMA excludes those large companies which are subject to the quarterly instalment payment scheme.
4.Subsection (2) provides that a number of conditions must be satisfied prior to entering into a managed payment plan. Subsection (2)(c) allows the Commissioners for HMRC to apply further conditions.
5.Subsection (3) provides that managed payment plans are not available to companies which have entered into a group payment arrangement.
6.Subsection (4) provides that so long as the taxpayer pays the instalments in accordance with the plan, each instalment is treated as having been paid on the normal due date. This means that there will be no late payment interest or penalties on those agreed instalments that are paid after the normal due date.
7.Subsection (5) provides that if the taxpayer fails to pay an agreed instalment, those payments made up to the date of failure are still treated as paid on the normal due date. Later payments are outside the scope of the section and, from the date of the failure, will attract late payment interest and penalties as appropriate. Late payment interest will run from the normal due date and late payment penalties will run from the penalty date.
8.Subsection (6) provides that companies that do not pay the agreed instalments still benefit from credit interest, but only where the failure arises before the normal due date.
9.Subsection (7) provides that an officer of Revenue and Customs may notify the payer that payments made after the due date will not result in a penalty.
10.Subsection (8) provides that instalments paid before the due date are balanced by instalments paid afterwards if their time values as defined in subsection (10) are equal, or approximately equal.
11.Subsection (9) provides that the time value of instalments paid before and after the due date are aggregated for this purpose.
12.Subsection (10) provides that the time value of any particular instalment is the product of its amount and the period in days before or after the due date.
Background Note
13.Some taxpayers find it difficult to pay their tax liabilities, particularly those with annual or twice yearly payment dates. Consultation and research have indicated that small businesses in particular would like a more flexible system that allows them to make smaller and more frequent tax payments than at present, which could help them better manage their cash flow.
14.HMRC supports those in temporary financial difficulty once a sum has become due through its Business Payment Support Service. It also offers a range of methods for payment in advance, including income tax budget payment plans and certificates of tax deposit.
15.Managed payment plans would allow taxpayers to spread their payments either side of the normal due date for payment of the tax, so long as those made in arrears are balanced by those made in advance. Entry to the plan will be voluntary.
16.While in the plan, taxpayers will not have to pay interest and penalties on instalments made after the normal due date. If they fail to make the agreed payments they fall out of the plan and the normal consequences for late payment will follow for the amounts unpaid at the date of the failure. However, taxpayers who fail to make the payments, but who remain in contact with HMRC about their debt, may be relieved from penalties that would otherwise arise. This is in line with HMRC’s Time to Pay arrangements to reschedule debt.
17.While it is expected that the details of any managed payment plan will be set out in the terms under which they are made available, HMRC may if appropriate specify these in regulations.
18.This measure was the subject of initial consultation in June 2007 and further consultation in December 2008 (Payments, Repayments and Debt: the Next Stage.) Draft legislation was published for consultation in January 2009, and a response document and a final Impact Assessment in April 2009.
