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Law: Online filing is on its way

The legislation to introduce mandatory online filing of tax returns by businesses has now passed, and over the next two years more detailed rules released and the regime fleshed out.

There will also be a requirement to make some payments of tax by electronic transfer rather then by cheque.

Here is a summary of what will be needed, and the planned due dates.

VAT returns

Businesses will be required to make their VAT returns online from 2010, but businesses with turnover of less than £100,000 will given more time to move over to online processes.

At the same time, when making online returns, businesses will also be required to pay their VAT electronically, by bank transfer or direct debit.

Online VAT returns are available now, and provide businesses with a significant advantage when they also pay by direct debit.

The time allowed for filing returns is extended by seven days when filing online, and payment is then collected from the trader's account a further three working days after the seven day limit.

This can therefore give businesses an extra 10 days or so before they part with their VAT.

There is no intention to require businesses registering for VAT to do so online.

Corporation Tax

Companies will be required to both file their returns and pay their tax online from 2011. This is a major new development, as the form of the online return will be technically different, and some companies will need to be ready to have new software to enable them to file online.

There will also be a facility to file accounts and tax returns with both Revenue & Customs and Companies House in a single step.

The technology to be used is known as XBRL, and Revenue & Customs are developing systems to deal with this.

This is why the commencement date is set well in advance - to allow time for systems to be developed and tested properly before going live.


Year end returns are already subject to mandatory online filing rules for all employers with 50 or more staff.

Those with 49 and fewer staff are still able to gain tax free incentive payments for filing their year end returns online.

#AM_ART_SPLIT# However, they will be required to file their returns online from 2009/10, which will be filed by May 2010.

From 2009, employers with 50 or more staff will also be required to file some PAYE forms online during the tax year.

The forms affected are forms P45, used when people either leave or start a new job, and form P46 which is used by those who start work without a P45. There will also be a requirement to notify staff moving onto a pension electronically.

In preparation for this the forms are being redesigned, and will need to show a date of birth and gender.

They will also be subject to what HMRC call the quality standard from 2008, which means that forms with errors on them will be returned for correction.

This is intended to allow employers to get used to the need for accurate data by the time the mandatory systems start. Smaller employers will not join this regime until 2011.

Income tax returns

There will not be any requirement for taxpayers to file online, but many taxpayers will find this a more convenient method, particularly as from next year they will have an extra three months to make their return if they file it online.

Don't be fooled however! You will still need to file your return by 31 January after the end of the tax year, but those filing on paper (or non-electronic returns as the rules call them) will have to file by 31 October next year to avoid a penalty.

There will also be flexibility about how you pay any tax due in the future, although individuals will not be forced to pay electronically.

However, the rules regarding payment by cheque will change so that payments will be treated as made when the cheque clears, rather than on receipt of the cheque as now.

This means that in future you will have to send in your payment much earlier if you wish to pay by cheque.

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