 HMRC calls for online tax for every business by 2013 but proposals must not burden SMEs
8 August 2011: Two consultation documents published today set out the Government’s next steps towards a fully online business tax system: compulsory online VAT returns will be extended to businesses with a turnover of under £100,000 by April 2012 (to date, only existing businesses with a turnover of £100,000 or more, and all new businesses registering for VAT, have been legally required to file VAT returns online and pay any VAT due electronically); and registering online for other taxes when starting a business will become the default option for all entrepreneurs by April 2013.
Patrick Harrison, tax partner with PKF, explains: “Although doing all your tax paperwork online looks set to become the default option, it should never become the only option. Pushing all tax communication online may save money for HM Revenue & Customs (HMRC) but making it mandatory would spark opposition from those who worry about data security – hardly a strong point for the tax authorities in recent years.”
“A ‘give and take’ approach would work much better, particularly for SMEs. Many new businesses struggle with cashflow in their early stages so HMRC should offer payment holidays or deferment of taxes and NIC to those start-ups that register online within a set time limit – say, within 30 days of starting to trade. HMRC should promote such offers in material issued by employers with all P45 forms as most entrepreneurs are employees before taking the plunge and starting a business.”
HMRC also announced today that it is creating registration ‘wizards’ to guide entrepreneurs through the process of setting up their tax records online.
Harrison comments: “These systems must be rigorously tested and fully integrated – any mistakes or multiple requests for the same information will worry and deter users. Those who register online should be given a clear timeline of what they need to do and when so that tax deadlines can be met. Similarly, HMRC should provide online support – such as checklists and timelines - for those ceasing to trade. At the moment business owners are often unsure what they need to do to get out of the tax system when they sell or wind up their business.”
It is already mandatory for companies to submit sets of accounts and computations tagged with Inline Extensible Business Reporting Language (iXBRL) alongside their tax returns and HMRC wants to expand the number of tags used by April 2013. However, Companies House has recently decided to drop plans to make it a legal requirement for the annual accounts it receives to be iXBRL tagged as an ever increasing number of companies voluntarily adopt this standard.
Harrison continues: “Companies House clearly recognises that it will get what it wants without making iXBRL tagging mandatory and HMRC should take the same approach. Over time, more companies are likely to switch to full tagging as the process becomes more automated so there is no need to force the issue.”
ENDS
For further information, please contact: Andy Konieczko, PR Manager, 020 7065 0537, andrew.konieczko@uk.pkf.com
Notes to Editors:
1. The two consultation documents published today by HMRC are: ‘Digital by default’ and ‘VAT: consultation on the next steps for moving VAT online’
2. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk
3. PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Channel Islands) Limited is incorporated in Guernsey.
4. PKF (UK) LLP is a member firm of the PKF International Limited network of legally independent firms. The PKF International Limited network has around 17,600 people operating in 120 countries around the world.
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