HM Revenues and Customs has outlined its plans to move the business tax system to a fully online service by April 2013.

The government publishedtwo consultation documents on Monday as the next step in moving towards a web-only VAT and tax system for business.
 
HM Revenues andCustoms (HMRC) is aiming to save s235 million moving to a web-led service, part of a four-year plan to reduce running costs by 25 per cent.

Figures from the National AuditOffice put HMRC's running costs at s3.6billion a year, and a target has been set to reduce those costs by s1.6 billion in the next four years.

Under the new web filing proposals, compulsory online VAT returns will be extended to businesses with a turnover of under s100,000 by April 2012.

At present, online VAT returns are only offered to existing businesses with a turnover of s100,000 or more, and all new businesses registering for VAT have been legally required to file VAT returns online and pay any VAT due electronically.

Registering online for other taxes when starting a business will become the default option for all entrepreneurs by April 2013.

HMRC also announced that it iscreating registration wizards to guide entrepreneurs throughthe process of setting up their tax records online.

Neil Whyte, tax partner with PKF, warns government efforts to reduce the paper burden cost in dealing with tax and VAT throws up worrying security issues.

He said: "Although doing all your tax paperwork online looks set to become the default option, it should never become the only option.

"Pushing all tax communication online may save money for HMRC but making it mandatory would spark opposition from those who worry about data security hardly a strong point for the tax authorities in recent years.

The Forum of Private Business recently highlighted cases where HMRC staff had not been trained to deal with electronic VAT returns, and is taking up to 50 days to verify VAT registrations.