VAT return online penalties criticised by business groups

The Forum of Private Business (FPB) and the UK200Group have joined forces to condemn a creeping compulsion to file tax returns online. The two organisations are increasingly concerned by pressure being brought to bear by the Government. Financial incentives given for filing Pay As You Earn (PAYE) returns online, coupled with Her Majesty’s Revenue & Customs (HMRC) considering financial penalties for those who do not file their VAT returns online ignore the needs and capabilities of some smaller companies.

"The £150 looks, at first glance, like good news," said the FPB’s Chief Executive, Nick Goulding. "In reality, though, many smaller firms have been submitting paper returns for years, and do not have the resources to train new staff to file them online. Larger businesses do, and this £150 therefore becomes a gift for the already advantaged bigger firms, as if small firms did not have enough unfair competitive practices to cope with."

The idea, floated by HMRC to bring in financial penalties for not filing VAT returns online, is similarly ignorant of the realities of smaller businesses, according to Mr Goulding. "HMRC should not be trying to dictate to people the method by which they declare their tax liability. Its job is to check that people pay the right amount, not to bully them into communicating that amount in HMRC’s chosen way and impose extra costs on them."

David Young, Chairman of the UK200Group’s tax panel comments: "Legislation has been in place since 2002 (and extended in the recent Finance Bill) to enable HMRC to require mandatory electronic filing (and payment) for Corporation Tax, VAT and PAYE, although they are still consulting on how this should be done. The filing date for sole traders and partnerships making a manual return is being brought forward next year to 31 October, with the previous filing date of the following 31 January being reserved for online filing.

"This is blatantly discriminatory - why should we have to comply with this victimisation simply because it suits HMRC to expend less effort doing the job they are paid to do? Just because it can be done does not mean it must be done."

Both the FPB and UK200Group are concerned that firms which do not have the capability to file online will be left with extra costs. Many smaller businesses do not see the need for either the IT technology or skills required to use it, whilst some are reluctant to change tried and tested systems or learn new ones. They could be facing the possible introduction of a fine system for non-compliance or the expense of purchasing equipment and training staff.