Firms 'need help paying tax bill'

The Revenue says its priority is coping with heavy online demand

The government needs to do more to encourage UK businesses to pay their company and value-added-tax (VAT) bills on time, a group of MPs has said.

The Commons Public Accounts Committee said that payments worth about £1.5bn were overdue each year, affecting HM Revenue and Customs, and the Treasury.

More efforts should be made to promote filing via the internet, it said, with incentives to encourage timely returns.

VAT and corporate taxes bring in about £129bn each year for HMRC.

'Better informed'

About 85% of VAT returns and about 77% of company tax returns are lodged on time.

But Edward Leigh, chairman of the Commons Public Accounts Committee, said that these levels were too low.

"Far too many businesses are failing to file their company tax and VAT returns on time and to pay what they owe by the due date," he said.

Mr Leigh added that HM Revenue and Customs (HMRC) "must be much better informed about the types of business which tend to be late in filing and slow in paying up".

Incentives he suggested include offering tax clearance certificates - which would show that a firm had complied with its tax obligations and could therefore apply for public sector contracts.

Simpler, fairer

HMRC said it welcomed the report and said it would consider the recommendations.

But it added that a recent review of its online service found that it should focus on being able to cope with high volumes of users at busy times - rather than offering additional incentives for timely payment.

Acting Liberal Democrat leader Vince Cable said the committee report showed that there was confusion about how tax returns should be made.

"The government can try as hard as it likes to encourage companies to file their tax returns on time, but the only way it will make a real difference is by making our tax system radically simpler and fairer," he said.