E-filing: a question of evolution?

In January, thousands of UK citizens sat down at their computers and tried to
file their self-assessment forms electronically, as suggested by the government.
They left their computers not knowing if they’d met the deadline and avoided the
hassle or would be fined £100 for not doing so.

At least 80,000 taxpayers experienced problems as the Inland Revenue website
buckled under the strain of coping with tens of thousands of people filing at
the ‘last minute’ – actually a few days before the deadline.

E-filing has been beset by teething problems, but there are signs that it is
getting better. Accountants like the idea – but it has created technical
problems in practice.

Typical problems in the early stages included the main page of the form not
loading, problems accessing certain sections of the form, and failure by the
system to notify that it had accepted the completed return.

In February, the taxman was forced to issue two-week extensions to all those
who had been affected by the technical limitations of its site, although it said
all its problems had been cleared up by 31 January.

The government knows it has to improve its e-filing service and ensure the
situation is not repeated next January. In June, the National Audit Office
published a review of the filing of income tax self-assessment returns.

It suggested greater use of e-filing to improve quality and revenue
collection, but also said that HM Revenue & Customs needed to ensure its
service was ‘fully available and accessible at all times’ and that contingency
plans were in place should systems fail.

HMRC would probably appreciate more users like Kent-based accountancy
practice Reeves & Neylan, which made a decision based on a successful trial
in 2003 that it would file all its returns on an electronic basis.

‘At that time we had no problems with 30 returns,’ says computer development
manager Robin Peters.

But 100% of returns equals around 5,000 forms, and the company did experience
some difficulties with its subsequent filings using the CCH Taxpoint system.
‘Though 90% went through fine, with some work, we have experienced problems and
can see there are definite “peaks and troughs” in system performance,’ he says.

Peters says that the gremlins he and his team encountered include inadequate
system capacity, a slow helpdesk and apparent communications lag between the
e-filing computer system and HMRC’s main server.

But the situation has definitely improved. ‘The helpdesk has really turned
round in response time and bug fixes and I feel the system is coping much better
overall. Though we haven’t yet gone through the December and January peak times,
we are confident that many of the problems have been ironed out,’ he says.

Peters notes that the main beneficiaries of the e-filing approach aren’t
accountants, it’s the government, which saves on economies of scale, and
clients, who are getting a much better service thanks to more automation,
including quicker refund cheques. ‘I’d say the government should continue to
pursue e-filing but maybe offer incentives to accountants, like with PAYE, to
encourage more take up.’

But what HMRC is more likely to see, until the systems are successfully
nailed down in January 2005, is the attitude typified by Bruce Lee, senior tax
manager at tax boutique Chiltern. ‘When it works, e-filing is very good,’ he
says. ‘It’s better not to have to deal with the vicissitudes of the Royal Mail.

The instant refund facility is great, and we could save money in January by
not using couriers. The PDF tax form makes all our lives a lot easier.’

But he’s not totally convinced. ‘I still don’t have absolute confidence then
that the system works. It doesn’t accept everything I put in. I’d also like
things to be worked out more openly.’

The opaqueness of these processes also concerns Chas Roy-Chowdhury, head of
taxation at the Association of Chartered Certified Accountants.

‘The NAO has asked for a greater push of e-filing to help accuracy, but the
government response has been lots of secrecy.

‘We only ever seem to find out there are problems at the last minute. This
isn’t helpful, as negative rumours about e-filing performance and integrity will
limit its take up.’

Accounting software specialist Sage says there is definite support for
e-filing. For the year ending 5 April 2005, online personal tax submissions
using its product were up 133%, to just over 40,000, with a 142% increase in
returns filed by accountants, to just over 413,000.

The firm believes, based on its own records and reports received from the
HMRC, that the total number of returns submitted using internet filing by either
accountants or individuals was 1.2 million in 2004 compared to just over 700,000
in 2003 – a rise of 71%.

‘Things seem to have improved,’ says Anita Monteith, tax manager at the
ICAEW. ‘However, we don’t understand how the government is so sure it will be
all fine in January. I’m a tax person, not an IT specialist, but that seems to
involve lots of system changes and experience shows even simple changes in
projects this large can take a long time to complete.

‘We’re sure e-filing is the way forward and it has been done very
successfully in Australia, but we have to see how the system copes as people
start using it.’

Behind all this uncertainty lurks the spectre haunting all big government IT
projects; their unfortunate tendency to crash and burn spectacularly. No-one
wants that for e-filing, says Roy-Chowdhury.

‘There is all sorts of scope and capability there,’ he says. ‘But it must be
difficult from the contractor’s point of view – there are so many new
regulations each year and the goalposts are always moving. The government needs
to recognise this and take action.’

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