PBR: Aligning company accounts and tax return filing dates. By Rebecca Benneyworthby
Proposals to link filing of company tax returns with the filing of accounts of those companies at Companies House were floated last November in the form of a consultation document. The document aired a number of proposals, but the most controversial of these was to reduce the permitted filing period for company tax returns to either 7 months after the end of the accounting period, or failing that, 9 months after the end of the period.
Responses were made during late 2005, with some of the professional bodies publishing their responses to the consultation.
The Pre Budget Report pack includes a document which summarises the responses to that consultation, outlines the action taken following the consultation and sets out the Government’s plans to take this issue forward. The plans need also to take into account the recommendations of Lord Carter in his report in March 2006 on this subject.
Responses were almost universally critical of any attempt to shorten filing deadlines at all, and the most vocal in their criticism of this were very large companies and their advisers. Given the lack of support for this change, HMRC have decided to make no changes on this front at present, but have very definitely left that door open for further review.
Taking into account Lord Carter’s recommendations, the firm proposals are therefore to :
- work with software developers and others to implement a joint filing facility for companies with HMRC and Companies House, as recommended by Lord Carter. This will allow companies who wish to do so to make a single electronic transmission over the internet to file their company tax return and their accounts for the public record. There is no intention to mandate joint filing at present. The combined system will use the XBRL data tagging technology recommended by Lord Carter. It is intended that this facility will be in place in plenty of time for the beginning of mandatory efiling of the company tax return in 2010; and
- make changes in the law so that the enquiry window for most company tax returns will be linked to the date when the return is actually delivered rather than the statutory filing deadline. Special provision is likely to be needed, however, in relation to groups of companies, as effective review of returns may require that all returns for a group should be considered together, and this may be very difficult if some companies in the group file early and some much later – this could reduce the effective enquiry window to a very short period. It is planned to develop draft legislation in time for the 2007 Finance Bill to implement this.
These changes together should encourage earlier filing, without the need to legislate for this. Government has already indicated that any legislation to require earlier filing of company tax returns, if made, would align to the payment date of 9 months after the end of the period, and would necessarily exclude large companies, given their very strong objections and the amount of disruption it would cause for them. The door on legislation to shorten the filing period has, however, quite definitely been left open, as indicated in paragraph 1.3 of the report:
“Voluntary early filing will offer a number of benefits, particularly earlier certainty and a more integrated process. The Government is leaving open the option of aligning the paying and filing dates in law if there is a significant shift towards earlier filing and if further analysis confirms that there are efficiency gains for all parties to be obtained from legislative alignment.”
At present, there are gains only to government from shortening the filing period, so this proposal will lie dormant for the immediate future.