smallbusiness.co.uk: Helping your business think big

The deadline for filing your tax return is fast approaching, but there is still time to complete the forms, and if you do it online you may be entitled to a tax-free payment of £250.

With plans to make online filing compulsory, small businesses would be advised to inform themselves of the proper procedures. The date from which you will be required to start filing online and paying electronically, says HMRC, depends upon how many employees you have according to its computer records. Currently, HMRC are offering incentives to businesses that begin online tax filing now.

Under Government proposals, small employers with fewer than 50 employees do not have to start online filing until 2009-10. However, if you file online for 2005-06 (return deadline 19 May 2006) you may be entitled to a tax-free payment of £250. With the incentives set to continue, you can file online for 2006-07 (return due by 19 May 2007) and get £150 next year.

To qualify for these tax-free payments you must have fewer than 50 employees, send your P14 and P35 data online and the return must meet the Inland Revenue Quality Standard.

If you use the simplified PAYE arrangements and send HMRC your P37 and P12 data online you will also qualify for the tax-free payments.

HMRC says it will credit the amount to your payment record and you can offset it against future payments you make, or you can claim it back and receive a cheque.

Click here to read about HMRC online services.