29 October 2020
Minister for Treasury and Resources, Deputy Susie Pinel, has published more information on possible payment options, ahead of the States Assembly debate on the Prior Year Basis (PYB) proposition
Currently, around two-thirds of taxpayers pay their taxes a year in arrears, meaning that they are paying their 2019 tax liability in 2020.
If the law amendment is approved by the States Assembly, the change to Current Year Basis would mean:
- PYB taxpayers who ‘pay on account’ (mainly the self-employed and pensioners) could defer their November 2020 payment
- PYB employee taxpayers who have seen their income reduce during 2020 are more likely to have a lower ITIS rate in 2021 (and lower monthly tax deductions from salary). If the proposal is not passed, these taxpayers are more likely to have an increased ITIS rate in 2021
- PYB taxpayers will retain an estimated £18 million that they would have otherwise paid in tax.
Under the proposals, PYB taxpayers will have the payments they made in 2020 (for 2019 tax bills) used to pay their 2020 tax liability. Their remaining 2019 tax liability will be frozen and paid in the future.
The move to CYB will not increase the amount of tax paid over a lifetime by PYB taxpayers; only the timing of the frozen 2019 tax bill being paid would change.
The draft payment options are as follows:
- PYB taxpayers could choose to sign up to a 20-year payment plan, starting in 2022, but with nothing to pay until 2025
- Regular payments would be expected on at least an annual basis and provision would be made for monthly payments, either through ITIS or a Direct Debit scheme
- Customers could overpay if they wish to clear their liability more quickly and they could apply for a ‘payment holiday’ of up to a year if their financial circumstances change during the payment period, without the need for an affordability test
- Alternatively, PYB taxpayers could use existing arrangements, or put new financial arrangements in place, to pay the liability when they reach States Pension Age. If choosing this option, they would be asked to provide evidence of the arrangements in place. The full 2019 tax bill would need to be paid within 12 months of reaching States Pension Age.
If this range of options is accepted or developed further, the affordability test originally proposed may not be needed, although Revenue Jersey would, as always, be able to consider cases of financial hardship on a case-by-case basis.
Arrangements are also being made to help PYB taxpayers who may have earned considerably more in 2020 than in 2019, to ensure they are not materially disadvantaged by these changes.
Minister for Treasury and Resources, Deputy Susie Pinel, said: “Reforming the tax system in this way is an ambitious proposal, and one which Islanders care deeply about: they have taken the time to sign a petition, respond to our survey, and get in contact with me personally to share their views.
“I’ve listened to all of the feedback, including the views expressed in last week’s in-committee debate and the top-level findings of the focus groups we commissioned, and have looked to address the concerns raised with our outline payment options.
“We’re now looking to provide PYB taxpayers with greater flexibility and control over when they pay their 2019 tax bill. By providing this information ahead of next week’s debate, I hope it will enable both the States Assembly, and the public, to have a greater understanding of the options before any changes are made.”
If the States Assembly votes in favour of the PYB amendment law, the payment Regulations will be published by the end of the year and will be debated in early 2021.
Once the outcome of the debate is known next week, Revenue Jersey will notify PYB taxpayers who ‘pay on account’ of any immediate impact for them. Revenue Jersey will also write to PYB taxpayers, if the proposal is agreed by the States Assembly, to explain what impact this will have on them, and the timeline for changes.
Individual taxpayers do not need to call Revenue Jersey to confirm their next steps, or to take any action. Tax officers will continue to prioritise assessing 2019 tax returns and responding to urgent queries from people who are in financial distress as a result of COVID-19.