April 2010 sees the introduction of a number of changes to the way that businesses must file and pay certain taxes. The only way to file these taxes will be online and payment must be made electronically. HM Revenue and Customs (HMRC) is keen to encourage online filing of returns, and the switch to online management and electronic payment of tax comes as a result of a review of HMRC's online services.
PAYE returns
Almost all employers are now required to file their employer annual return online. Employers with less than 50 staff must file end of year forms online by April 2010 at the latest, and from 6 April 2011 the requirement to file in-year forms (including P45 and P46) online will also apply to these employers.
Meanwhile, penalties for late payment apply from 6 April 2010 and will affect payments due to be made from May 2010 onwards. The system will be based on the number of defaults during a tax year, and excludes the first default. The penalties will range from 1% of the total amount for the next three defaults, to 4% of the total for 10 or more defaults. Any sums that remain unpaid after six months from the penalty date will be subject to a 5% surcharge, with a further 5% surcharge applying after 12 months.
Exceptions
There will be a limited number of exceptions to the new system. In particular, late payment penalties will not apply to employers who have agreed “time to pay” arrangements with HMRC, where payments continue to be made in accordance with the terms of the arrangement; and where the employer or contractor has had “reasonable excuse” for not paying on time. (“Reasonable excuse” does not include any late payments which have arisen simply due to an inability to pay).
In the light of this significant change in approach, it is important that employers review their systems and procedures so that they will not fall foul of the payment deadlines.
VAT returns
From 1 April 2010, HMRC will begin the process of phasing out paper VAT returns. Businesses with an annual turnover of more than £100,000 (excluding VAT) will need to file returns online and make payments electronically, for accounting periods beginning on or after that date.
Businesses with an effective VAT registration date on or after 1 April 2010 will need to have returns filed and payments made online, regardless of their turnover. The remaining VAT registered businesses may continue to file paper returns for the time being, but the situation is set to be reviewed by 2012.
Penalties for failing to make an electronic return will be applied to periods ending on or after 31 March 2011.
Corporation tax returns
Also in the pipeline, for returns due after 31 March 2011, corporation tax returns must be filed online with accompanying accounts and computations in Extensible Business Reporting Language (XBRL), the new standard designed for business financial reporting. Payments must also be made electronically. Companies House will accept company accounts in the same format, which will apply to all company tax returns being submitted to HMRC from April 2011.
You are advised to ensure that you make the appropriate arrangements in good time. We can help with all your tax planning needs, including dealing with your tax returns on your behalf – please contact us for information and assistance.
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