RSS feedsAccountants and their clients can now file so many different statutory returns electronically that the term e-filing has become almost ubiquitous. It can be used to describe submitting DTI applications for export licences, self-assessment tax returns to HMRC, or sending any one of a number of forms to Companies House – and all of them have the potential to save firms and their clients considerable time and money.
‘The business benefits have been huge in all of the areas where we file electronically,’ says Simon Massey, head of tax at Menzies, where e-filing is being used to automate statutory filing wherever possible. Anne Jones, director of Anton Freres, echoes his enthusiasm. Her firm does everything it can electronically, because it makes the accountant’s job so much easier. ‘I’m essentially a lazy person,’ she says, ‘and I love being able to automate things.’
Despite the tales of woe that often accompany the self-assessment season, Massey is a big fan of internet-based filing. Last December, he was able to use the system to great effect for a husband and wife team who were experiencing cashflow problems. ‘The wife was due a refund and the husband had a huge tax liability, but didn’t have the money to pay,’ he explains, ‘so I filed her return electronically, as early as possible and the refund arrived in time to pay his tax bill.’ In Massey’s experience, if you file for repayments electronically, you get the money back much faster than you would with the paper-based system.
Jones has also been able to use e-filing to impress her clients. ‘I think Companies House introduced electronic filing at just the right time,’ she says. Clients were open to the idea of using it and appreciated the problems they might incur if they did not. ‘I have signed up everyone to Proof,’ she says of the Companies House system designed to help protect businesses from corporate identity theft (see Foil the fraudsters below). ‘They didn’t take much convincing,’ she says. ‘None of our clients have ever had this type of problem,’ she adds, but it would have been irresponsible not to take them down the safest route.’
Forms galore
Over the past couple of years, electronic filing has revolutionised the way practitioners and the public are able to interact with Companies House. It is possible to file a range of forms such as incorporation documents (forms 10 and 12), changes to the registered office (form 287), director and secretary changes (forms 288a, 288b and 288c) and share capital changes (forms 88(2) and 123). It costs only £15 to file an annual return (form 363) electronically, instead of the £30 charge for filing a paper form – and you will soon be able to file annual accounts electronically too.
One of the things accountants seem to like about electronic filing is the comfort factor. ‘Because you get a message back after you have successfully filed a submission, you have the certainty that your returns have been received and are being processed,’ says Massey, who prefers this to the more personal touch he has experienced in the past, when dealing directly with HMRC staff. ‘They don’t employ the fastest people to process returns,’ he laughs, ‘so automation has taken some of the skill from the process.’
Jones would also rather deal with HMRC systems than some of the people it employs. ‘Their attitude can be rather unfortunate,’ she says, explaining: ‘When something goes wrong, they always behave as if it is my fault not theirs.’ Regardless of the cause, this seems to be the default position. ‘I get the impression that HMRC staff have been told that their systems don’t make mistakes,’ she adds. But Jones knows from personal experience that this simply isn’t so.
Over the years, she has experienced a number of problems with the systems at HMRC. She remembers when HMRC changed the length of a parameter it would accept for names in PAYE returns, then forgot to notify all the software suppliers; or the time HMRC lost a couple of hundred company records and had to ring agents and ask them to help rectify the situation; and she is still trying to sort out a problem that has occurred because HMRC seems to have no record of one of her client’s electronically filed returns, although she received a message confirming its receipt. Even so, Jones sees more good than bad. ‘There are always teething problems with anything new,’ she says, ‘and when the systems work they are really good.’
So why are accountants such as Menzies and Anton Freres still in the minority? ‘I think there is a fear factor,’ suggests Massey. ‘Some accountants are wary of e-filing because HMRC doesn’t want you to submit additional documents, such as pensions statements,’ he says, ‘but if you generate the right form of words then people won’t need to refer to the supporting documents.’ At his previous firm only one of the eight offices used electronic filing, but there were no more enquiries there than at any of the other offices.
Internet security
Practitioners have also shied away from electronic filing because they view the internet as inherently insecure. But the security systems are now so effective that filing-by-internet is safer than leaving things to the tender mercies of the postal system. If you want to use the government’s various e-filing systems you need to register with the Government Gateway, which links customer-facing web applications, such as self-assessment and PAYE online to the back-end database systems in the relevant government departments. It has so far proven robust and secure and transactions are as secure as you choose to make them.
A digital certificate is required to file VAT returns, but is optional for self assessment and PAYE. But you can buy one for less than £50 from an organisation such as ChamberSign (www.chambersign.co.uk) or Equifax (www.equifaxsecure.co.uk/ebusinessid), and once you’ve got one, it can be used to digitally sign each transaction you send to the Gateway, verifying your identity, establishing your credentials to perform the intended transaction and protecting the integrity of the information itself.
Whatever their reasons for avoiding e-filing in the past, those who have kept the march of progress at bay will not be able to do so for much longer. The first mandatory transition to e-filing for statutory reports is already here. Employers with 250 or more employers have been required to file year-end PAYE returns electronically since May 2005. Those with between 50 and 249 employees joined them in 2006, and even those with fewer than 50 employees will have to file their P35 and P14 forms electronically in 2009/2010 when the e-filing of self-assessment returns will also become mandatory, if HMRC and Lord Carter have their way.
So why not make the transition sooner rather than later? Despite a few hiccups every now and again, practitioners who have made the leap of faith see fewer burdens than benefits. As Jones says: ‘Nothing is ever perfect, but going back to filing returns manually would be an absolute nightmare.'
Foil the fraudsters
There are two ways to file documents electronically with Companies House. You can use software from a specialist supplier such as Digita or PTP, or make use of Companies House’s own web filing service. The latter is probably most appropriate for individuals, but as you need to visit the website and log on using a unique company security code, this approach is too time-consuming for most accountants acting as agents.
Fortunately, specialist software packages can enable the practitioner to use a single code to file documents for all their client’s companies. They also offer features such as automatic production of forms and bulk filing, and users benefit from being able to use a Companies House credit account to centralise fee payments.
At the moment, it is all too easy for fraudsters to use the paper-based systems at Companies House to 'hijack' a company by changing its registered office, trading address, directors’ names, and so on. Once they have done this, the stolen identity can be used to order goods and services; and when they are not paid for, the real company can experience all sorts of costly and complex side-effects.
In 2005, Companies House introduced the ‘Proof’ and ‘Monitor’ systems. Once a company has signed up to Proof, selected forms can only be submitted electronically using a unique authentication code. The Monitor system provides another layer of security, because it enables users to keep an eye on the documents filed with Companies House and alerts businesses to any unauthorised changes to their company record. Customers can also use it to keep up to date on their suppliers, customers or competitors.
Lesley Meall is a freelance technology and business journalist
