Filing of VAT and company tax returns : sixty-fifth report of session 2006-07, report, together with formal minutes, oral and written evidence

"Filing of VAT and Company Tax Returns (HC 548)" examines HM Revenue and Customs' success in getting Value Added Tax (VAT) and Company Tax returns in on time and on encouraging businesses to file tax returns online, following on from a December 2006 report from the National Audit Office on this subject ("Filing VAT and Company Tax Returns (HC 102)" - ISBN 0102944024).The Department spends over GBP 9 million a year on processing nine million VAT and Company Tax returns but one in five Company Tax returns and one in seven VAT returns are filed late or not at all.

The Department lacks information on businesses that repeatedly file late and also on the links between late filing and other forms of non-compliance.

The penalty regimes are variable and the fixed rate penalties for Company tax are low and not routinely applied.

The report recommends that the Department look at the use of non-financial incentives such as tax clearance certificates.Less than 10 per cent of companies use online filing and the Department does not expect to meet its target of getting 50 per cent of VAT returns filed online by 2007-8. Plans for mandatory online filing for Company Tax have also been put back to 2010.

Online filing would save the Department most of its current processing costs and be cheaper for businesses.

Additional plans to reduce the administrative burden of filing taxes are unlikely to be implemented before 2011.