The system would allow businesses to use a digital tax account to find out what their estimated liabilities are and make a payment towards them, allowing HMRC to allocate the money from their account when taxes are due.
It would also allow overpayments to be returned quickly and let businesses reclaim voluntary payments which have already been made but not allocated to a tax liability.
Voluntary PAYG will apply to unincorporated businesses, sole traders and landlords, in respect of their income tax, National Insurance contributions and capital gains tax from 1 April 2018, to VAT from April 2019, and to incorporated businesses - in respect of their corporation tax affairs - from 2020.
In a consultation on the subject, HMRC stated that under PAYG, the customer will decide how often and what amount they want to pay.
“Payment will not have to be at any fixed time, or at regular intervals; the customer will retain control and choice, so they feel confident that they have made the right decision for their circumstances, and have the opportunity to amend their choices if circumstances change.
“There will be no such thing as a missed voluntary payment,” the document added.
Voluntary payments will sit on the customer’s digital account as a credit and unused credits will be carried forward for use against future tax liabilities.
HMRC said the benefits of this system would “stand on their own merits”, but it is also considering a series of proposals to encourage businesses to use this system.
These include paying interest on credits, streamlining HMRC’s security processes related to making repayments quicker and using incentives such as cash rewards, like it used to encourage electronic filing of PAYE returns.
In last March’s Budget, the government promised that by the end of the next parliament every individual and small business in the UK will have all their tax details available online.