John Holden, EDI consultant at specialist software firm Kewill Electronic Commerce, explains how EDI works: “It’s like a highly secure e-mail system. Company A sends a complex e-mail to the Inland Revenue, which uses it to update its records.” EDI can run on a PC with a simple modem, and does not need a dedicated machine.
The Revenue says EDI will speed up the system because payment vouchers can be sent in quickly and returned immediately if there is a problem, such as incomplete information. Many large construction firms already use EDI to send PAYE information to the Revenue. These firms will be able to add the facility to send vouchers by EDI to their existing system.
Computer software company Mentor Systems offers a wide variety of EDI solutions for payroll and accounts and its client list includes several major contractors. The firm has used the Revenue’s specifications to develop software geared to the new Construction Industry Scheme tax vouchers that can be added to its existing systems.
Plymouth-based SAA is another specialist providing EDI software. Like Mentor, it supplies large construction firms with integrated accounting packages, and these will automatically include a facility for sending vouchers to the Inland Revenue.
One housebuilder, Westbury Homes, is even looking at developing its own software to cope with the tax changes.
So how much does EDI cost? SAA and Mentor were reluctant to comment on the cost of sending tax vouchers electronically because, for their contractor clients, this is only one part of a tailored business package.
Kewill’s Holden was more forthcoming. The firm’s stand-alone EDI system costs £2000 for the total package in the first year. This includes installation of the system and software, plus instructions on how to use it. Firms also need a value-added network to communicate with the Inland Revenue.
The initial outlay with Holden also includes rental to the network provider, plus user-support charges. After the first year, these two elements are charged at £400 a year.
The big question is whether the benefits justify the outlay. “It depends on your perception of the hassle factor of producing written documents,” says Holden. “Using EDI reduces the administration and gets it out of the building quicker. My final comment when talking to people is: ‘That’s how much it costs – how much is it worth to you?’” So, how much is it worth to contractors and clients? Brian Lucas is commercial services director at contractor Geoffrey Osborne. He is considering adopting EDI to ensure that vouchers get to the Inland Revenue on time, and describes the costs quoted as “bearable”. He adds: “We would probably adopt it because it seems more economical than taking on additional staff.” But not all the new paperwork can be dealt with by EDI, including the voucher for CIS6. This is issued by the subcontractor and must be completed by the contractor.
For many in the industry, a new tax procedure is daunting enough without the added complication of electronic data interchange. As Richard Clancy, financial controller at Jarvis, says: “Once the system is up and running, it will make things easier, but there is going to be a learning curve because we have never done it before.” For more information, contact: John Holden, Kewill 0161-969 8763; Alan Bricknell, SAA, 01752-606000; Janet Rowles, Mentor Systems, 01254-295000.
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Should you buy EDI?Pros
- EDI will simplify and speed up sending large quantities of vouchers
- It will cut down on paperwork and allow problems such as incomplete data to be rectified quickly
- A new system can be subject to hiccups in infancy
- Not all the new tax vouchers can be dealt with by EDI, such as CIS6
- Only affordable for large contractors