Impact of a flexible model of calculation for the IYC pilot and future timely payment

This is a KAI Social Research contract let through the Research and Insights DPS to tender mixed-methods research to explore ITSA customers' views on the impact of a flexible model of calculation for the in-year calculation pilot, and future timely payment.

From April, a three year in-year calculation pilot (IYC) commences; this will build insight and enable the testing of policy/system design choices for future timely payment (TP) (bringing the calculation and payment of tax closer to the point where income or profit arises for taxpayers, paying tax based in their current year position). Customers, through the TP CfE, challenged a 'one size fits all' model of TP. This research will help determine policy/design options of a flexible model which can be tested through the IYC pilot, to help build a calculation system which supports customers whilst realising wider government benefits.

As part of the Tax Administration Strategy (TAS), we published a CfE on TP, exploring perceptions around the benefits/challenges of TP. Many respondents highlighted the need for a flexible model of TP, which reflected the diversity of the SA population.

This view was echoed by internal research which found that customers would broadly support and engage with TP if there was flexibility, control, and structure. This research proposes a deeper dive into what these elements could look like practically for customers, and how this may differ across populations/customer groups/business models.

The IYC pilot runs for 3 years, and through it we will be able to test policy choices and mitigation. The first year of the pilot involves detailed investigation, internal and external co-design activity to establish optimal design, delivery, evaluation, and evidence requirements. The timing of this research will compliment this phase, allowing maximum input into design

This research will first collect quantitative data on ITSA customers' experience of gathering and submitting information to facilitate tax calculation, paying tax and appetite for IYC and TP, including anticipated impacts, benefits and challenges. A second, qualitative stage will explore in-depth, the potential financial and other effects of IYC and TP on ITSA taxpayers (including vulnerable customers), exploring issues around structure, control and flexibility. Both elements will be instrumental in identifying considerations to help shape IYC system/policy design (to test through the three-year IYC pilot) and inform policy options and costings for TP

Both stages of the research will take cognisance of findings from relevant work (e.g. undertaken by HMRC Policy Lab examining issues around cashflow and the implications for more frequent tax payments; two soon-to-be-published research reports examining the tax challenges faced by self-employed taxpayers and MTD for ITSA customers).