So the Government is considering a Treasury plan to collect unpaid tax by removing it directly from bank accounts.
This, I fear, is the thin end of the wedge. If HM Revenue and Customs win the day then the next stage could well be tax by direct debit. In other words, HMRC would assess the amount due and just remove it from the debtor’s bank account.
For businesses, this could create many difficulties.
Yes, the tax has to be paid by the due date, but on many occasions, it becomes necessary to delay payment, due to a shortage of incoming cash.
To be given no choice in the matter – and having regard to the current attitude of banks towards authorised overdrafts being breached – could result in a very considerable financial problems, sending some operations close to the edge.
Many small businesses are currently finding life very difficult in relation to cash flow. Day-to-day activity is increasing, and more money is required to service expansion. To add to the problem, customers are getting somewhat tardy in paying by the due date, with a few pushing back their remittance to as long as 120 days from invoice date.
Banks are not sympathetic to this situation, which will undoubtedly get worse when the inevitable bank rate rise occurs.
The prospect one day of tax being collected by direct debit is horrifying, but there has to be a chance that it may happen.
Already, large companies, such as fuel and power suppliers are pushing hard to get all their customers onto this form of payment by penalising those who pay by other methods. This pressure is bound to increase, for so far as they are concerned, it cuts costs.
Businesses are finding themselves between a rock and a hard place, with flexibility gradually being eroded.
However, I do not think that this will happen before the general election, for it most certainly is not a vote winner. Indeed, there are already voices being raised in government that cold water should be poured on the proposal.
HMRC will not give in easily, but all businesses and individuals should lobby their industry representatives to give this idea a definite thumbs down.
* Russell Luckock is chairman of pressings firm AE Harris
