VAT is Changing


As well as going up from 15% to 17.5% and who knows maybe higher still in 2010, VAT is also moving permanently online. The short and simple 9 box paper form that many traders know and, indeed perhaps, love is being retired (for all companies with turnovers greater than £100,000 – those companies get another couple of years).

In 2000 and 2001, working at the Inland Revenue and then the Office of the e-Envoy, we talked a lot about compulsion to carry out government transactions online, about incentivising people to do so (both by charging for the paper version or by offering “discounts” for using online services). The Inland Revenue were the first to try this with the 2001 Self Assessment form – offering £10 to all those who sent their return in online. It wasn’t a great success. The world wasn’t read for SA online and, truth be told, SA online wasn’t ready for the world.

Since then, the Carter report was published, where he said:

The Government has invested over £500 million in HM Revenue and Customs online services. The return on this investment takes the form of improved services for its customers, lower operating costs and greater service delivery flexibility. To maximise the benefits the services need to be robust and customer orientated, HMRC is planning to spend around £170 million in systems designed to deliver these proposals between now and 2012. The investment will be focussed on improving the existing services so that they are resilient and tailored to users’ needs.

Over one third of Income Tax Self Assessment returns are now received online and this has grown year on year since the service was introduced in 2000-01. Almost 2.9 million people filed their 2006-07 return online by 31 January 2007, with the system coping with a peak demand of 14,500 returns per hour. This was a major test of the robustness of the HMRC online service, and the upgraded systems performed very well.

However, take up of the online services for the main business tax returns has been slower to date.

A corporation tax (CT) online filing service was introduced in 2003, and HMRC received over 25,000 company tax returns through this service in 2005-06.

An electronic VAT return was first introduced in 2001 and 10% of VAT traders have signed up to make returns online since an improved online VAT service was launched in 2004.

And went on to say

This shows that slow but steady progress in increasing levels of take-up of online services can be achieved through voluntary adoption. However, the Government has concluded that more pro-active measures will be needed if the benefits are to be fully realised within a reasonable timescale. Following Patrick Carter’s Review of Payroll Services in 2001, the Government announced a three-stage move to universal online filing of employers’ end of year returns. The first stage, for large employers, was implemented in Spring 2005 and there has been a dramatic increase in the use of the PAYE service. These measures included financial incentives for smaller employers to move to online filing ahead of the planned requirement for them to do so – 65% of small employers took advantage of this in 2005/06.

And, specifically for VAT:

– Online filing of VAT returns, and electronic VAT payments required for traders with an annual turnover of more than £100,000 for accounting periods starting after 31 March 2010.
– Online filing of VAT returns, and electronic payment of VAT, required for traders newly registering for VAT after 31 March 2010;
– Traders with an annual turnover below £100,000 will be encouraged, but not required to file online. The continuing need for this exemption will be reviewed in the run up to 2012, in line with Lord Carter’s recommendation that HMRC should aim for universal electronic delivery of the main business tax returns by 2012.

It’s interesting to see how this has played out.

Back in 2000, some of us put together this vision for how things would evolve with online services in the Inland Revenue. We didn’t know how things would turn out and, honestly, thought the move online would be much quicker than it has been …


We also put this slide up


It feels like the IR (now HMRC) are still in that middle box – getting a meaningful usage percentage for online VAT is one of the last challenges (the last is probably online corporation tax using standard messaging]. I’m no longer close to the strategic thinking in that department. I wonder if they have plans for the right hand box? I wonder also if that’s even relevant anymore.

What we were thinking about back then was

1) start a company with companies house, online, but via your bank who have pre-checked your identity

2) get your IR details (PAYE, VAT, CT etc) tied to your company details tied to your bank details – so one reference number shared across them, one userid .. perhaps multiple passwords (to allow for different roles)

3) solely online communication with government regarding your company

The same could be reasonably true for a person as opposed to a company – the hook from the bank might be even easier

All that said, I’m not sure I’d have gone with the reminder stickers seen at the top of this post.

3 thoughts on “VAT is Changing

  1. & one day, perhaps, the online vat form will recognise (nay, encourage, heaven forfend !?!) flat rate vat.& let's not even go to the whole business of registration & login, which is more complex than … than… oh i don't know, rubic's cube, blindfold. & less secure.the left hand may know what the right hand is doing, but one is several steps in front of t'other& then hmrc could talk to a usability advisor about making the whole online vat process discoverable on their website.all of which suggests that:- hmrc is still org centered, not customer centered- no-one at hmrc has stopped to calculate the cost/benefit of providing customer service to mystified would-be online users vs getting the usability right in the first place- hmrc isn't yet interested in raising as much cash as quickly and easily as possiblewhich ought to be a crime.

  2. HMRC made a series of changes at the end of November that they say made the service easier to use (although I doubt they will go quite as far as you want).  did you get a chance to try them out?

  3. Maybe it is beyond the power of IR (HMRC) to deliver the right hand side box until the whole of the rest of government is adequately aligned.  HMRC do not own enough of the B2G or C2G to enable the transformation to occur under one department and cooperation between the various responsible departments is simply not there and probably could not be there while the management structures and reporting lines that exist today remain.In interesting situation is going to occur.  Just when government needs the savings that proper transformation would bring (an indeed the customers need) they have no money.  This is not a problem that will be solved until the government has the cash surplus and that will not be for many years to come.

Leave a Reply