Confusion for very small firms on electronic filing

Small businesses with fewer than five employees appear to have a year’s grace in which to comply with new rules requiring firms to file their annual employers’ returns electronically.

However, it has been mooted that HM Revenue and Customs (HMRC) has not made the status of very small businesses clear enough on the matter.

Statements from the tax authority have suggested that all employers are subject to the new requirement that the returns be made online as from this month.

The only indication that very small employers may be exempt has come from references to Income Tax (Pay As You Earn) Amendment No 2 Regulations 2009. On the list of penalties for non-compliance, the fine for employers with one to five workers is shown as £0.

Tasked by the Daily Telegraph newspaper to clarify the issue, HMRC said: “There is no specific exemption for employers with five or fewer employees. However, for this year only, if an employer with five or fewer employees sends their return to us on paper, rather than send them a penalty notice, we will instead write to them to remind them of their obligations and explain where they can find further help and guidance.

“From 2010/11, all employers who send their return on paper when it should have been sent online will be charged a penalty.”

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