HM Revenue and Customs is to invest £340m in its online service infrastructure over the next nine years as it bids to meet the aim of universal electronic delivery of tax returns from businesses by 2012.
The investment includes the £205m already committed to improving HMRC’s online infrastructure, plus an additional £135m announced in the Budget.
Moving towards universal electronic filing is the key recommendation made in Lord Carter’s review of HMRC’s online services, which was published alongside the Budget. It is hoped the move will save businesses and taxpayers £175m a year and reduce administration costs by £84m a year.
Lord Carter recommended that, in stages leading up to 2012, businesses should be required to begin filing VAT returns, Pay As You Earn in-year forms and company tax returns online from April 2008, while computer-generated paper “substitute” returns for income tax self-assessment should be phased out from 2007-8.
But he warned: “Achieving this … will require online services to be properly designed around the needs of taxpayers and their agents, and sufficiently reliable and robust to provide good customer experience at peak times. Crucially, HMRC needs to make substantial investment and to rigorously test any change prior to implementation.”
Paymaster general Dawn Primarolo welcomed Lord Carter's report and recommendations. She said, “The measures announced respond to the needs of business for a package of robust, high-capacity online filing services.
"An expansion in electronic delivery of tax returns will benefit businesses and taxpayers with savings of £175m a year by streamlining the filing process."
The work will be managed by HMRC through its existing Aspire IT contract.
HMRC has come under fire after the tax-credits system fiasco that saw two million claimants overpaid by a total of £1.9bn, with software errors responsible for 540,000 wrong payments. Last month the Commons Public Accounts Committee found the troubled department was making errors in calculating at least a quarter of taxpayers’ PAYE codes.
But the HMRC website held up well as the deadline for self-assessment tax returns arrived at the end of January, with no reported problems. This marked an improvement on 2005, when taxpayers’ deadlines had to be extended by a fortnight because of failures in issuing receipts.