HMRC to introduce mandatory VAT filing online

News Article - 25 August 2011
Category: Regulatory

HM Revenue and Customs has revealed it plans to make it compulsory for VAT registered businesses with a turnover below £100,00 to file VAT returns online from 1^st April 2012.

HMRC has also indicated this month that its online service will become the "default channel" for businesses to register and de-register for VAT returns and change sensitive financial details.

Accountancy experts have warned HMRC that it must not look to offload any of its costs onto small businesses as a result of their "default" online channel.

Patrick Harrison, tax partner with PKF, said: "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 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."

Instead Mr Harrison suggests the taxman should adopt a "give and take" approach, providing start-up businesses with the flexibility of payment holidays to stand on their own two feet.

However, there appears to be a groundswell of opinion against the implementation of mandatory online VAT filing. Small business owners who cannot afford computers which they would only use to file VAT returns will find themselves increasingly marginalised, with compulsory online filing equating to expenses many SMEs simply cannot justify.

Three particular business owners applied to a judge in November 2010 to continue to be allowed to file paper VAT returns. The individuals include a resident with minimal broadband access, an owner with arthritis and another owner with sight problems that suffers from hydrocephalus.

The argument is that with very tight profit margins, implementing equipment required to help them file online would potentially put them out of business.

Just days before the hearing was scheduled for June this year, HMRC offered individuals the option of telephone VAT returns or employing an advisor who could complete the returns online.

Robin Williamson, technical director of the Low Incomes Tax Reform Group, wants HMRC to take the pleas from small business owners seriously.

"We hope HMRC will take seriously the fact there are a great many people in areas of the country where broadband is slow or non-existence, or those that cannot afford it, or those that have disabilities that prevent them from doing so," he said.

Article keywords: HMRC, online VAT filing, PKF, SME, Low Incomes Tax Reform Group

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