Technical Briefings
17 March 2011
What is iXBRL?
Introduction
Everything is changing on 1 April for the filing of corporation tax returns.
Background
From 1 April this year it is compulsory for almost all limited company accounts and CT600s (company tax returns) in respect of accounting periods ending after 31 March 2010 to be filed in iXBRL format.
There are very limited exceptions to this, the main one being for "smaller" charities (that is, one where, together with any wholly owned subsidiaries (companies owned by the charity), the combined income does not exceed £6.5 million for the accounting period). For these, the CT600 has to be filed in iXBRL format, but the accounts can be submitted as a PDF file.
In addition, ALL corporation tax payments made from 1 April 2011 have to be made electronically.
What is iXBRL?
inline eXtensible Business Reporting Language is a computer-readable format that can also be read by people - rather like the HTML code that is used to write and display web pages.
Why the change?
In 2006, the Carter Report recommended that all tax returns should be filed electronically. This is the implementation of that recommendation for companies.
Who benefits?
HMRC will see cost savings as it saves the time currently spent manually keying-in accounts and tax returns. This automated data collection should also help them target tax enquiries at companies that deviate from the norm. There is no benefit to the taxpayer and most will actually see their compliance costs increase.
Surely my accountants will take care of this for me?
In many cases, that will be true. Where your accountants prepare your annual financial statements using appropriate software, most of the software houses have upgraded their packages to allow for the accounts to be converted to iXBRL format. However, the conversion process is not 100% accurate, and extra time may be needed to ensure that the iXBRL file is fully compliant.
If, however, you prepare the accounts yourself in, for example, Word, someone has to convert these into iXBRL format. Various companies are offering to carry out this conversion, and this is a service that Wilkins Kennedy can provide. Clearly, there will be a cost for carrying out this conversion, and it may be sensible for you to talk to your accountants to see if the time has come to use their accounts production software.
There is a further hurdle for quoted companies as their auditors are prohibited from assisting with the conversion, and so third parties will need to become involved here.
Does HMRC provide software?
They do, but it is limited in capability and only suitable for small companies. It is quite a laborious system to use but, for very small, unrepresented companies, this may be a workable solution.
Is anything else changing?
For the first year of implementation, HMRC has said that it will adopt a "soft landing" approach. This means that, provided you have made a good effort to get your accounts and tax return into iXBRL format and you have succeeded in filing them online, they will not impose penalties for incorrect or missing "tags" (the detailed naming elements) in iXBRL files.
During the first two years (so up to 31 March 2013), only a limited number of tags (from a list of around 1,250) have to be applied. However, from 1 April 2013, the full set of tags for UK accounts (some 6,500 possible items) will need to be applied.
Companies House are also modifying their systems to allow for iXBRL accounts to be filed online, and this will also become mandatory from 1 April 2013.