New electronic reporting requirements imposed bu the
government will force many small businesses to upgrade their IT,
says Dennis Keeling
The chancellor has a predilection for change in his
budget each year. Small employers already have to administer tax
credits, stakeholder pensions and a whole range of extra deductions
through the payroll.
Soon it will become compulsory for them to file their
end-of-year payroll returns online. Large companies must start
filing online in 2005 and firms with fewer than 50 employees must
file online by 19 May 2010.
On the plus side, it is possible to claim £825 over five years by
filing online early. However, to do this, SMEs will need to make
sure that the payroll software they use to file online is capable
of sending the data electronically, and that, from April 2005, it
meets the Inland Revenue quality standard. A list of approved
payroll packages is available on the Inland Revenue website.
The Inland Revenue website says, "End-of-year returns filed online
that do not meet the quality standard will be rejected by the
computer (you will get an error message telling you why). You will
need to put the error right before trying to file again. Otherwise
your return will still get rejected and you will run the risk of
missing the filing deadline. If you miss it, you may be charged a
penalty. So the earlier you file online, the better." Sound advice,
you might think, as these things never seem to work first
time.
New regulations from the Financial Services Authority will come
into force next year for thousands of small financial advisers. The
regulatory information they must supply is based on the FSA's new
taxonomy, which covers every aspect of their business, requiring
many hours of work collating the data. As this data will be derived
from many different sources there is no single software application
(other than a spreadsheet) that can help.
Like many other government bodies, the FSA wants to impose the
highly complex electronic standard for transmitting financial data
called Extensible Business Reporting Language (XBRL).
This standard was designed for use by large multinational companies
and its complexity has so far meant it has been adopted by just a
handful of determined organisations. Unlike standard XML, which can
be embedded into business applications, XBRL needs to be configured
by the company sending the data transmission, making it very
difficult for novice users.
The government has mandated the use of XBRL for all financial
reporting irrespective of the hardship it will create for smaller
businesses. We can expect to see XBRL being used for filing
corporation tax returns to the Inland Revenue, annual returns to
Companies House, and VAT returns to Customs & Excise - this is
sheer madness.
All these plans will have an impact on the IT systems being used by
SMEs but there has been very little consultation with the software
industry to find out if the changes are practical. Hundreds of
companies which are quite happy with the systems they have used for
years will find they need to upgrade to comply with new rules. Many
will have to replace their business systems because the suppliers
no longer support legacy systems. Ten years ago there were 700
accounting packages in the UK - today there are fewer than
100.
According to an online accountant's newsletter, AccountingWeb, the
Treasury has refused to consult the Institute of Chartered
Accountants in England and Wales' tax faculty before its review of
the small company tax regime.
So, once again, new rules and regulations will be imposed on SMEs
by people who have no practical experience of the problems they
create. The All-Party Parliamentary small business group has also
complained that the Treasury is failing to meet its own guidelines
for consultation.
And all the time the new regulations covering every aspect of the
business keep coming - waste handling, stamp duty, disability
discrimination rules starting in October and so on. Last month, the
Finance Act became law and imposed penalties should any company
fail to notify the Inland Revenue when it starts to trade. Fines
will be imposed of £300 plus £60 per day if the failure
continues.
Last year saw the number of business insolvencies in England and
Wales increase to more than 50,000 - the highest for almost a
decade. But that was a boom year with interest rates at an all-time
low. I wonder how many of those companies were beaten by red tape
and uncomprehending bureaucracy?
Dennis Keeling is chief executive of the
Business Application Software Developers Association
