From 1 April 2011, all company tax returns must be filed online. The new HMRC rules shouldn’t really come as a surprise to anyone. Living as we do in the age of e-government, the move from optional to mandatory is a natural step.
But the obligation to file returns online has a second requirement affecting businesses that submit accounts (and the associated computations) along with their corporation tax return. Under the new regulations, all accounts for periods ending after 31 March 2010, which are filed with HMRC after 1 April 2011, must be submitted in inline eXtensible Business Reporting Language (iXBRL).
It’s more than a simple technical change. iXBRL is essentially a mark-up language, similar to the HTML code used to build web pages. Like HTML, iXBRL works by ‘tagging’ pieces of information. These tags not only tell compatible systems how a piece of information should be displayed, but also what it is and how it relates to other information in the accounts. For instance, a tag might tell the system reading the document that a certain set of numbers are turnover figures.
From the perspective of HMRC and Companies House, the advantage of iXBRL is that it creates documents in a standard format that can be easily read by people and analysed by computer software. In this respect, the aim of the new system is to increase both the efficiency and accuracy of information processing by government agencies.
How will iXBRL affect my company?
All companies will have to file accounts in the new format. That means figures drawn up in a Word document or a spreadsheet will have to be converted into the iXBRL format using approved software.
Unincorporated organisations and some charities that don’t need to prepare accounts under the Companies Act can still send accounts in PDF format. But they must send any computations in iXBRL.
Spurred by HMRC, accountancy firms have been gearing up for the change. Baker Tilly, for instance, has software that will prepare accounts and tax computations in iXBRL. Equally important, for companies that prepare their own figures using word processors and spreadsheets, we have software that will read and convert these documents.
Action point
Companies should seek advice from their accountants on how to prepare for the new system. It is important to ensure that your company or your accountant has both the necessary software and expertise in place.