The August 2022 issue of HMRC’s Employer Bulletin announced that a variable payment plan for PAYE and NIC liabilities would be introduced from 19 September 2022. However, there have been some delays and HMRC now expects the functionality to be available in early October. The current system allows only a single payment to be made by direct debit.

In response to questions raised by ICAEW’s Tax Faculty, HMRC has provided some further details about how the variable payment plan will work in practice.

First, HMRC has confirmed that the direct debit amount will be the figure declared on returns submitted by employers/payroll agents, or a lesser figure if any overpayments have been allocated to reduce the original declaration. The direct debit will never be greater than the value declared on the return and can never be more than £20m, in accordance with direct debit BACS rules.

Second, the money will be drawn on 23 of each month, or the next bank working day. The employer will receive an advance notice three days in advance of every collection date, to ensure they are notified of the amount being collected. There will be no additional interest charged to employers who choose to pay by variable direct debit payment plan, provided that their direct debit payment does not dishonour for whatever reason, (ie, insufficient funds, bank account closed, etc.).

Finally, HMRC has confirmed that its current guidance on filing deadlines remains unchanged.

Details about how to set up a variable payment plan can be found in HMRC’s Employer Bulletin. Agents cannot set up direct debits on behalf of clients, as banking rules require direct debits to be set up by a signatory to the bank account.

As this is a new service, employers may wish to monitor it carefully and check the notifications. ICAEW would welcome feedback from employers who choose to set up a variable payment plan. Please contact Peter Bickley to contribute.