The UK government is seeking feedback on plans to require businesses to pay their PAYE and VAT return liabilities by Direct Debit. The aim is to reduce late payment, limit the flow of debt, and simplify the payment process to cut errors.
HMRC is consulting on the proposal, which would make Direct Debit the default payment method for businesses. The consultation process runs until 16 August 2026, and responses from the business community and tax agents will help determine the scope of any changes.
The move has raised concerns among accountants and business owners, as it could mean fines for those who pay their taxes on time but use the wrong payment channel. The existing regime already carries interest and penalties for late payment.
Some experts welcome the underlying move to reduce errors and simplify the payment process. However, they question the prospect of fines for those who pay on time by other means.
Business owners are warning that the switch could cause cash flow problems for firms that time their payments deliberately. They argue that the mandatory Direct Debit would give HMRC a preferred creditor's schedule, not theirs.
Additionally, the changes could affect business owners who pay their tax by card. Those who earn rewards points and other benefits on card payments, as well as those using certain credit cards with interest-free credit, may be impacted.
The government has stressed that it recognises that some businesses may face challenges in paying by Direct Debit and will consider feedback from the consultation. Over a million taxpayers already fall foul of HMRC deadlines each January, so business owners may want to respond to the consultation to ensure their views are heard.
