No Single File Please, say Bosses

23 February 2006

Government plans for companies to file their accounts and their corporation tax returns together, were criticised today by business leaders. The alleged de-regulatory benefits of the new filing system would be outweighed by the increasing burden on companies with moderately complex tax affairs, the Institute of Directors (IoD) claimed.

Under the proposals businesses would submit their tax returns to HM Revenue and Customs along with their statutory accounts that are kept by Companies House. Currently, limited companies have at least an extra two months to submit their tax returns to HMRC after filing their accounts with Companies House, and the tax return filing deadline is 12 months after the year-end. The proposal, combined with changes to accounts filing deadlines in the Companies Bill, would reduce this to either seven months or nine months.

Richard Baron, Head of Taxation at the IoD, said:

"This would be bad news for large and small companies alike. In larger companies financial accounts and tax returns are normally prepared by different people, who work to different timescales, with financial accounts being prepared before tax returns. It can also take a while to get all of the required information from dispersed operations, especially where they are overseas.

"Small companies, on the other hand, might be confused by joint filing. They would have to send full financial accounts for HMRC purposes, and then (if they wanted only limited information to be publicised) abbreviated accounts for Companies House purposes. It would seem very odd to many small companies to send two sets of financial accounts in the same package. And there would be a risk of the wrong information being passed on to Companies House."
 
The IoD said it was particularly concerned about taxpayer confidentiality and the dangers of the wrong information being passed to Companies House staff. Given the very large number of companies in the UK, it is practically inevitable that sooner or later, something would go wrong and confidential information about a company's tax affairs would be made publicly available.

Richard Baron, added:

"The current system is not broken and does not need to be fixed. The proposals would greatly increase burdens on companies and would increase the risk of errors. There would be no effect on tax payment dates, and no other unambiguous benefit to Government."