Online filing incentives abused, admits Varney

Small companies may be filing as 10 different companies rather than one to
attract incentives for early filing, HM Revenue & Customs said this week.

Speaking at a Commons public accounts committee meeting, David Varney,
chairman of HMRC, told MPs that incentives for early online filing were not
without their difficulties: ‘We get all sorts of unwanted behaviour. People file
as 10 companies rather than one,’ he said.

HMRC introduced the incentives this year. Companies that file online before
the 19 May each year receive £250 tax free, with payments set to be lowered in
later years as people become used to the online system.

Lord Carter is currently reviewing HMRC’s online services, and is expected to
recommend an extension of the practice, which has proved highly popular.

‘It has persuaded a lot of people to file online,’ said Simon Sweetman,
vice-chair of the Federation of Small Businesses’ tax policy unit.

But Sweetman questioned whether playing the system would be advantageous:
‘The cost is surely going to exceed any incentives they offer. Once you have set
up this company and submitted a tax return and filed proper accounts with
advisers you are looking at £700 already.’

A spokeswoman for HMRC, stressed that only ‘a tiny number’ of individuals had
set up multiple companies.

Meanwhile, it has emerged that many people who filed their accounts early
online have not received the £250 incentive payment.

Paul Aplin, deputy chairman of the ICAEW tax faculty, said: ‘I gather HMRC
has a hell of a problem processing all the PAYEs. They say “you can always set
it against PAYE liabilities”, which is fine if you owe them anything, but it’s
weak when they said at the time that they would send out cheques.’

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