From 1 April 2011, all corporation tax payments need to be made electronically and all corporation tax returns must be filed online. This might not seem particularly onerous on the face of it, but alongside mandatory online filing, companies must now deliver their tax computations and annual accounts to HM Revenue & Customs (HMRC) in the new iXBRL electronic format. Read on to find out more about iXBRL.
iXBRL is an electronic tagging system that allows corporation tax returns to be read electronically and for HMRC to collect and analyse the numbers submitted automatically. Key pieces of information are ‘tagged’ from the UK GAAP taxonomy. (A taxonomy is a dictionary or reference list that sets out the available tags which, in the case of the UK GAAP minimum tagging list adopted by HMRC, currently amounts to 1,253 possible items.) Additional taxonomies exist for companies preparing their accounts under International Financial Reporting Standards. Charities also fall into the regime if they are incorporated and are required to file a corporation tax return. Preparing a tagged set of accounts and tax computation is more time consuming than submitting a paper return and there will be cost implications, particularly for the financial statements.
HMRC has indicated that it will adopt a ‘soft landing’ approach during the first two years of the new regime, and will advise and support people on getting it right. Provided businesses make reasonable attempts to submit iXBRL accounts, HMRC will not issue penalties or reject returns if the new iXBRL requirements are not fully met during this period. However, accounts which do not include certain mandatory tags will not clear HMRC’s electronic gateway and incorrect or missing tags may skew HMRC’s risk-assessment ratios, potentially increasing the risk of a corporation tax enquiry. Our advice is that companies should aim to get this right the first time.
Certain very small companies can also use the HMRC gateway to file their accounts with Companies House. It is likely that in the future this will be extended to larger businesses so that companies will file a single set of tagged accounts that both HMRC and Companies House will use.
If Kingston Smith already prepares your accounts, tax returns and computations, we will produce all of the documents in iXBRL format using our specialist software.
If you have any questions about online filing and iXBRL, ask your client partner or contact Janice Riches on 020 7566 3804.