New rules came into effect in January 2010 which mean that company tax returns for accounting periods after 31 March 2010 must be filed online from 1 April 2011. Also, any corporation tax and related payments must be paid electronically.
Six tax and accountancy bodies have written to David Gauke MP, Exchequer Secretary to the Treasury, to express their concern about the forthcoming mandatory requirement that all UK companies should submit statutory accounts to HMRC in iXBRL format.
ACCA, AAT, ATT, CIOT, ICAEW and ICAS are all concerned about HMRC’s proposals for the ‘transition’ arrangements, which come into effect on 1 April 2011, and the fact that there are ongoing software problems.
The letter contains the following recommendation:
We recommend an immediate amendment to the implementation plan, as follows:
From 1 April 2011 companies should be required to file their CT computations in iXBRL together with the CT600 return online - as mandated.
The accompanying statutory accounts should be acceptable in either iXBRL or PDF format for a period - we suggest a minimum of six months, to be reviewed as the market progresses.
Full implementation of iXBRL-based CT online filing including statutory accounts should proceed thereafter, although for the following 12 months HMRC should accept any CT return as valid if its iXBRL tagging meets the HMRC gateway validation criteria, even if this falls short of the "minimum tagging list
Professional bodies should encourage their members to file both accounts and computations in iXBRL as soon as is feasible.
For the year beginning 1 April 2011 and for the two years following, HMRC should be particularly lenient in relation to any late filing penalties for CT returns and when considering rejecting returns due to iXBRL related issues.
HMRC should take swift action to advise taxpayers and agents of these refinements to the implementation plan, and should issue clear guidance on how the current problems arising from non-delivery or late delivery of software are being addressed.
Changes to the implementation plan should be enshrined in legislation.
On 1 February ACCA and five other tax and accountancy bodies wrote to David Gauke MP, exchequer secretary to the Treasury, to express our concern about the forthcoming mandatory requirement that all UK companies should submit statutory accounts to HMRC in iXBRL format.
HM Treasury has replied to the letter and rejected the request for companies to be allowed to file in PDF, saying that 'mandation of online filing will go ahead as planned on 1 April'. It also says 'no-one who makes a reasonable effort to comply will be penalised' and has stressed that this is a key area of HMRC's guidance.
Following the letter from the Treasury, HMRC has published revised guidance highlighting its advice on how to 'manage the transition' to online filing of 'company tax returns', including advice on tagging and penalties.
If you have any comments on the guidance, please email them to us at supportingpractitioners@accaglobal.com
ACCA believes that businesses do not have the tools, training support or time to comply with this new requirement. ACCA has been supportive in the development of iXBRL and believes it will help to protect the tax base. However, we want to be sure that glitches are ironed out and extra unnecessary costs for businesses are avoided. The solution is for business to be given more time.
We have learned that software and support is not ready for this 1 April deadline, and have been lobbying HMRC for businesses to be given breathing space so mistakes don’t happen. The concern for ACCA is that businesses are given time to file using XBRL without any problems. This means that a deferral would be better for them - perhaps a six months deferral - until they are ready to go.
This move to XBRL is a new and big change for businesses, as well as for tax accountants helping their business clients with their corporation tax filing. So the transition needs to be as smooth as it can be. Without the necessary software, training and support it will cause problems and frustrations.
We urge HMRC to communicate rapidly to taxpayers that its aim with iXBRL is improvement, not cost imposition. If HMRC continues with its 1 April deadline, it will impose a significant business cost on a large number of firms which will dilute, if not destroy, the message that iXBRL should be a positive long-term step for UK businesses.
All entities that are sent a notice to deliver a corporation tax return are required to file that return online. Also, any organisation that is within the charge to corporation tax must pay that tax (and any related payments, such as interest on tax paid late) electronically.
The requirement to file the return online includes clubs and smaller charities and the like. However, in those cases where an organisation is not required to submit its accounts to Companies House HMRC will allow them to attach their accounts to the return submission as a PDF file rather than provide the accounts using iXBRL if they prefer to do it that way. HMRC do still require the computations from everyone to be sent using iXBRL though.
There are two situations where a company or unincorporated organisation may be exempt from online filing:
HMRC has developed guidance to help you through switching from paper to online company tax returns and electronic payment. This guidance explains XBRL and iXBRL and deals with:
Guidance is available on:
The latter provides particularly valuable help and support. It starts with what you need to know before you start and takes you step by step through the downloading and completion process. It introduces you to the return and tells you how to customise it, with pictures of what you will see on the screen.
It takes you through completion of the accounts template, the computations template and the CT600, through to the final review declaration and submission, with pictures at every step.
ACCA talks to HMRC on the introduction of XBRL, iXBRL and online filing and electronic payment in our new podcast. The discussion covers:
HMRC has provided its own software for users with single use; this is available free of charge. Before you start you will need:
The guide does not give instructions, but does provide a link to a site containing instructions. You can download the software via the link here.
It is suitable if you are dealing with a return for a small company or organisation with straightforward affairs. It allows you to submit:
Once you have downloaded the return, you do not have to remain online to complete it, but can save it and come back to it before you submit it.
This software comes together with on-screen help to guide you and help you identify errors as explained above.
HMRC has published a guide on Filing your Company Tax Return online - a beginner's guide. This guide contains information to help you submit your company tax return - form CT600, accounts and computations - online using the HM Revenue & Customs (HMRC) free corporation tax online filing software.
If you currently prepare accounts in Excel or Word, you can continue to do so, but add an extra task. You can convert a Word document into an iXBRL file with the help of ‘conversion’ or ‘tagging’ software.
Alternatively, you could obtain an iXBRL accounting product.
The third option is to outsource the iXBRL production; several providers will take your existing non-iXBRL accounts and convert them.
If you are already using accounts production software, the provider will probably produce an iXBRL upgrade, but make sure that it will be ready in time. HMRC has issued a list of suppliers here and many major suppliers have absorbed the cost of developing the product.
Points to be addressed immediately include:
XBRL products are only now being developed and may change from year to year, as the versions are updated. Additionally there are changes to UK GAAP that will have to be accommodated. You will also have to review the work done, as before to ensure that the right judgments have been made in the preparation of the accounts. It is important that, whatever decision you make, it is right for you.
Inevitably, there will be a steep learning curve. iXBRL is mandatory, but HMRC has indicated that it will take a ‘light touch’ to filing for the first two years.
Will your chosen provider issues updates and is that included in the cost as the underlying technology (‘taxonomies’ - the tagging codes) change from year to year as does the tax legislation?
If you are considering outsourcing the work, is to someone competent and who works to the ethical standards that you require?
It is time to consider the options so that you can make the necessary arrangements in time to be ready before 1 April arrives.
This area is discussed in the ACCA podcast.
HMRC has stated that if an entity makes no attempt to comply with the new rules and sends a return on paper when it should have been sent online, they run the risk that we will simply reject the return because it hasn’t been delivered in the proper format, and if they don’t remedy that by the time the return is actually due, they may incur a penalty for failure to make the return.
It has also stated that it understands that this it is a new service and it doesn’t want the technology to be a barrier to online filing. It has stated that it will take a sympathetic view in the first couple of years towards any organisation that has obviously tried to deliver a compliant return online but has struggled - perhaps because of their software - and ultimately been unable to file online.
Companies House is introducing an iXBRL filing platform, aligning it with HMRC but its use is not yet mandatory. At present, they require all submissions to be well-formed XML, to be provided as XHTML. iXBRL-enabled applications allow the preparer to publish an HTML version of their accounts laid out as they wish.
To encourage use of iXBRL, they have produced a validation service, which will check documents submitted and advise of inconsistencies. It is available here.
The validation service will cater for both XBRL and iXBRL and allows users to submit their XBRL documents for testing. Submitted accounts will be tested for conformance with the XBRL specification and compliance with UK GAAP.
When the document is submitted, the validation service will give either a ‘successful’ response, or a list of errors.
Companies House has produced its own list of approved suppliers.
These should, however, be compared with the list provided by HMRC to establish whether they provide XBRL filing, as there are substantial time savings to be had by using the same document to prepare both types of submission.
As yet in the near future, this will be the strength of converting to XBRL once we have passed the pain threshold.
Companies House has announcing that by March 2013 the vast majority of its filing services will be digital only. It hopes to mandate electronic submission for all incorporations and for filings of annual returns, accounts and the main company changes for the standard company types and corporate entities.
It will move from the current 30% electronic filing to 98% of the entities on the public register and over 92% of all transactions. For the small number of other corporate entities and transactions it will continue developing electronic services but will not mandate them at this stage.
Further details can be found on the Companies House website, see Related Links.