Taxman to invest £340m expanding e-services

HM Revenue & Customs (HMRC) is to invest £340m in upgrading its online infrastructure as part of a push to universal electronic filing of tax returns by 2012.

The plans form part of the recommendations made in Lord Carter's review of HMRC's electronic filing services, which was released this week.

Carter's key recommendation is that HMRC should work towards universal online filing of tax returns from businesses and "IT-literate individuals" by 2012. Almost a quarter of self-assessment tax returns were filed online in the financial year 2005-06 and more than 60 per cent of employers filed online last year.

Other targets set in the review include forcing businesses to file their VAT returns, company tax returns and PAYE in-year forms online from April 2008, promoting online filing by tax agents, and introducing new self-assessment filing deadlines from 2008.

HMRC said it plans to invest £340m in online service infrastructure over the next nine years. The new electronic filing requirements will be introduced in phases from 2008 and will apply first to large and medium-sized VAT traders and employers.

But the new rules will not apply to the smallest existing self-employed businesses until at least 2012.

Carter said in his report: "Achieving this, however, 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 Carter's report and said in a statement: "An expansion in electronic delivery of tax returns will benefit businesses and taxpayers with savings of £175m a year through streamlining the filing process."