Far too few firms are filing their tax and VAT returns on time and taking advantage of online facilities to do so, according to a report published by the parliamentary Public Accounts Committee (PAC).
Edward Leigh, chairman of the PAC, said, "HM Revenue & Customs must ensure its online services for VAT and company tax returns are not only sufficiently robust and secure, but also offer facilities which sell the idea of electronic communication and online filing to businesses. And the department must go further than it plans at present to lighten the administrative burdens associated with compliance."
HM Revenue & Customs spends more than £9m a year on processing some nine million VAT and company tax returns, and incurs further costs in chasing businesses for overdue returns and correcting errors.
Since the Revenue introduced online filing for VAT returns in 2001 and Company Tax returns in 2003, take-up by businesses has been low, said the Public Accounts Committee.
The department does not expect to meet its Public Service Agreement target to get 50% of VAT returns filed online by 2007/08.
Its plans for introducing mandatory online filing have been put back to 2010 for VAT and 2011 for company tax returns.
The Public Accounts Committee report says HM Revenue & Customs expects online filing to save most of the £9m a year it currently costs to process paper returns. It estimates that a typical business will save £5 per VAT return and £20 per company tax return by filing online.
Online filing also brings added benefits because the potential for error in the returns is reduced, said the PAC.