Summary of measure

An extra 50 pounds discount for small employers paying tax credits to their employees was announced by the Chancellor today. Small employers with tax credit cases in 2000/01 who file their PAYE end of year returns over the Internet and pay any tax due electronically will receive the discount.

This is an addition to the 50 pounds discounts for VAT and PAYE announced on 16 February to encourage small businesses to embrace Internet technology. A total discount for small businesses of up to 150 pounds.

The PAYE and tax credit discounts will also be available to small employers who use an Internet payroll service.

Further details

1. From April 2000 employers will pay Working Families’ Tax Credit (WFTC) and Disabled Person’s Tax Credit (DPTC) to their employees through the payroll if notified to do so by the Inland Revenue. The Revenue will continue to pay the tax credits direct to self-employed and non-earning applicants.

2. The Inland Revenue and Customs and Excise are introducing services to allow taxpayers to send a wide range of tax forms and returns via the Internet. From April 2000 individual SA taxpayers will be able to file via the Internet and from April 2001 businesses will be able to file VAT and PAYE returns via the Internet.

3. The Government announced on 16 February that one-off discounts for Internet filing would be linked to each of these new services. There will be discounts of 50 pounds for PAYE, 50 pounds for VAT and 10 pounds for Self Assessment. The additional discount for employers paying tax credits will be available to all small employers who qualify for the PAYE discount and pay tax credit to one or more of their employees in 2000-01.

4. The discounts for PAYE and tax credits will be available to those employers who file and pay direct and to those using Internet based payroll services. The detailed arrangements will be the subject of consultation over the coming months.

5. Internet technology will help deliver the Government’s vision of making services available 24 hours a day, seven days a week. The discounts should encourage take-up of the new services, lead to administrative savings and boost customer service by offering businesses and taxpayers new ways of dealing with their tax affairs.

Background notes

1. The Prime Minister has set a target that 25% of transactions with government should be capable of being done electronically by 2002.

2. The Government is also taking a leading role in encouraging enterprise in electronic business and in the development of the infrastructure needed to support the competitiveness of UK business in the growing e-commerce markets.

3. Legislation in the 1999 Finance Act enables Customs and Inland Revenue to develop new electronic services for taxpayers to use as an alternative to traditional paper-based communication. In addition to supporting the Government’s broader policy objectives for electronic communication and e-commerce generally, the development of these Internet-based services should have efficiency benefits for small businesses and the Revenue departments, and should provide improved customer service for businesses and individual taxpayers.

4. The Finance Bill 2000 will include powers for the Inland Revenue and Customs and Excise to make regulations to provide incentives to use electronic means of communication with the tax authorities.

5. WFTC and DPTC were introduced in October 1999 to replace Family Credit and Disability Working Allowance, two social security benefits. The tax credits are designed to help working families and workers with a disability on low to modest incomes. They are administered by the Inland Revenue.

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