Budget 2007: Carter deadlines eased; shorter enquiry window confirmed. By John Stokdykby
The Finance Act 2007 will include a raft of provisions to put in place Lord Carter's proposals for shorter deadlines for paper self assessment tax returns, and a 12-month window for HMRC enquiries from the day a return is filed.
Following the success of last year's "No to November" campaign, Lord Carter back-tracked on his initial suggestion to cut the self assessment filing date from nine months to seven. The 31 January deadline remains for electronically filed returns, but paper returns will now have to be submitted by 31 October for the 2007-08 tax year onwards.
To encourage early filing, the government has taken on board the suggestion to impose a 12 month window for enquiries from the date a return is filed rather than from the 31 January deadline. Section 12AC of the Taxes Management Act 1970 for income tax returns (partnerships), and paragraph 24 of Schedule 18 to Finance Act 1998 for company tax returns will both be amended so that where a return is received on time, the enquiry window will run until the anniversary of the date of filing.
After last year's outrage, HMRC appears to be living up to its undertaking to listen to its "customers" and a Budget update on HMRC online services sets out revisions to Lord Carter's deadlines for companies to file corporation tax, PAYE and VAT returns online. An extra year is being allowed to prepare for the filing of PAYE in year forms (P45s and P46s), which will now be mandatory from April 2009 rather than 2008. Filing Corporation Tax returns electronically will now be mandatory from 2011, a year later than originally planned and all companies now have until April 2010 before they are forced to file VAT returns and pay VAT electronically. This gives an extra two years' grace for firms turning over more than £5.6 million.
"One of the biggest issues raised by stakeholders during recent engagement has been whether HMRC’s IT systems will be ready in time to support those services which are being mandated," the department explained.
Extending the mandatory deadlines will "de-risk implementation" it said and ensure that the relevant systems are robust and gain user confidence. "Additionally the extended timetable will give large firms more time to prepare for in-year PAYE (where their processes are often decentralised) and more time for XBRL (a financial accounting language which companies will be required to use for their accounts) to mature; two concerns which have been raised with us," it said.
From a practical point of view, the April 2008 deadlines for PAYE in year forms and some VAT efiling are just over a year away, noted lecturer and AccountingWEB contributor Rebecca Benneyworth. "From my understanding, we are approaching the year ahead test date and the announcement indicates that the Revenue is not ready."
Paul Aplin, of AC Mole and deputy chairman of the ICAEW's Tax Faculty praised the department for abiding by what he calls the Carter principle, "that nothing is launched until its been tested and proved fit for purpose".
Aplin told AccountingWEB: "The HMRC has acknowledged that it has already got good volumes on self assessment, and is now putting its investment into getting that working really well. Then it will move on to the other applications.
"That's better than the pre-Carter scenario where a deadline was set and the department would launch and be damned. This is a huge step forward."
Kevin Hart of Sage, who also chairs the business software trade association BASDA, was also cheered by the news. "They have listened," he said.
"We flagged up real concerns about their ability to deliver robust, reliable services of industrial strength, which haven't always been their forte. The mantra now is to get it right first time, which we welcome. Deferring some deadlines now is more appropriate than coping with slippage later."
While a victory for common sense, the surprise deadline changes will upset some software developers who would have prioritised work on efiling mechanisms to cater for Lord Carter's original timetable, Hart said.
"They will have put aside other commercially driven developments and dedicated a lot of expense and energy into something that now isn't due for another year. The HMRC will have a balancing act to keep the momentum it has gained for things like PAYE efiling, so that people don't go to sleep now that mandation has gone back by a year."