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Chancellor urged to use Budget to re-think mandatory online tax filing for small firms |   |
The Forum of Private Business (FPB) is calling on the Chancellor to use the Budget speech to change his approach of trying to force smaller businesses to submit tax returns online. Gordon Brown will make his speech to Parliament on 21 March 2007 and the FPB wants him to recognise the problems that some small firms have with online returns.
Online filing was introduced for VAT in 2001 and for Company Tax in 2003. Take-up of on-line filing in 2005–06 was below 5% but increased in the first half of 2006–07 to 7.8% for VAT and 7.2% for Company Tax returns. HM Revenue & Customs (HMRC) is adopting a staged approach to making online filing mandatory on both taxes by 2012 but the FPB believes little thought is being given to some smaller companies without the technology or the understanding to implement the change.
Campaigns Manager Victoria Carson said that the Chancellor must invest in support for those firms: "HMRC is proposing a penalty regime for those who fail to render their VAT returns electronically, but we are urging the Chancellor to offer the carrot as well as wield the stick."
Penalties have been proposed of between £100 and £300 for companies failing to file VAT returns online. The proposed penalties will have the greatest impact on smaller businesses which are the most likely to be unable to comply. The FPB believes there are a number of areas of concern in such fines.
"Not all small businesses are able to submit returns and payments electronically and it isn’t fair to force business to either purchase computer equipment they would not otherwise use, or engage professional assistance to submit returns on their behalf." said Miss Carson.
Currently there are no proposals to make allowance for businesses with computer breakdowns. It therefore seems inevitable that there will be considerable litigation regarding reasonable excuse following the introduction of the proposals. The FPB also wants reassurances that HMRC’s systems will be robust enough to cope with increased online use.
Other areas of taxation that FPB would like the Chancellor to review in the Budget are:
- The understanding of the difficulties of compliance with tax regulations for smaller businesses
- The combination of VAT and Company Tax inspections to follow those recommendations already presented in the O’Donnell Review.
- Further integration of Class 1 National Insurance Contributions and PAYE. In the Budget speech of 2006 the Chancellor spoke of the possibility of a wider consultation concerning integration.
- Simplification of VAT registration.
Posted March 12, 2007
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