Businesses face accounts chaos over new tax filing system

Small business groups and accountants have warned of accounts chaos in April after the Government refused to back down over controversial plans to force all accounts to be filed in a new online format for which much of the software has yet to be delivered.

From 1 April all UK companies face a mandatory requirement to submit statutory accounts to HM Revenue & Customs (HMRC) in a new computer format. But accountants, trade bodies and small business groups say thousands of companies have not yet received the software to enable them to do this, and even those that have are struggling with serious implementation problems.

At the beginning of the month trade bodies including the Association of Accounting Technicians, the Association of Chartered Certified Accountants, the Association of Taxation Technicians, the Chartered Institute of Taxation (CIOT), the Institute of Chartered Accountants in England and Wales (Tax Faculty) and the Institute of Chartered Accountants of Scotland urged David Gauke, exchequer secretary to the Treasury, to allow a delay, or at least enable companies to file accounts as PDFs for this year only.

But while the Government has said that HM Revenue & Customs will oversee the new arrangements with a “light touch”, the new system has to go ahead. It comes at a time when many small businesses are struggling with difficulties in obtaining finance and what they say is an ever-increasing burden of regulation. Ministers are desperate for SMEs to act as “engines of growth” and generate jobs at a time of steep cuts in public spending.

Andrew Cave, chief spokesman of the Federation of Small Businesses, said: “There are huge problems with the new system. The software just isn’t up to scratch. This is being rolled out too soon. But it is more than that. Some 30 per cent of our members are suffering from unreliable (broadband) coverage and 60 per cent have problems with uploading and downloadng at a critical time for their businesses.”

Mr Cave urged ministers to think again and allow SMEs extra time to make the transition.

He was backed by Tina Riches, technical director at the Chartered Institute Taxation. She said: “We’ve been working on this for some time. The only way to get the market moving was to force the hand of software companies by making it compulsory so they would develop software.

“The problem is there has not been enough time to get the software ready and implemented. Some of our members have been able to file successfully, but others are having all sorts of problems. Some are having problems with implementing the software, others simply haven’t received it. I can understand their [the Government’s] dilemma. They want people to get on with it but there are a lot of companies who will struggle with this.”

Toby Ryland, tax partner at Blick Rothenberg, said: “The fact is that a number of (software) providers have not been able to get software and the relevant forms ready and even where they have, it is creating substantial extra work to input data.”

He added: “This has all been provided so late that we suspect a huge number of firms are going to be unable to file. This will leave them wide open to potentially huge penalties, not to mention the capital cost they face of buying all the new software and getting up to speed with using it.

“We would urge the Government to think again and allow firms a period of grace to get the new software online and working. Forcing everyone to do it on 1 April as at present is in our view a recipe for chaos.”