Electronic government payments

The government is anxious to get business to pay VAT and PAYE etc contributions electronically; so much so that soon they'll be phasing out any other way of paying. So what you might ask, doesn't this mean less paperwork and a more efficient payment system - yes it does, but there's a small catch.

Unless you pay by cash or debit card (the same thing really) the options currently available are - Cheque, Direct Debit, or BACS/CHAPS. A cheque and BACS operate in the same fashion, you set the amount you want to pay and inform both your bank and the receiving bank of this amount; with a cheque it's a physical piece of paper with BACS it's all done electronically. With Direct Debit you authorise the receiving bank to take any amount of money out of your account whenever they want to. Yes there are codes of conduct in place, but that is essentially what a DD mandate does.

So in the first cases you inform HMRC how much you owe and send them that amount, in the latter case you inform them how much you owe and they take it. To those of a paranoid nature Direct Debit isn't a good thing ask those who utility companies foist a £Xk bill onto.

Again so what? Well for businesses the banks charge whenever you use their "facilities" in our case (and fudging the figures slightly for confidentiality) our bank charges 75p for every cheque we write and 20p for every DD paid out. So DD is the cheaper option, except for that bit about giving the receiver the power to draw money. A BACS payment on the other hand costs £5.15 each.

If we can't write cheques anymore, the logical choice is to use Direct Debit and that puts the power into the hands of HMRC and any mistakes on either end will only cost us.

[Update 19/11 - Just for fun HMRC have informed us that we must submit PAYE forms online. Okay that's handy to fill out the monthly P38s... oh wait you can't do those online, just the end of year forms.]