Preparing for e-government
STEPHEN DUFFETY, managing partner at Baker Tilly’s East Anglia office, looks at future changes to filing requirements affecting all organisations
FROM April 1, 2011, all company tax returns will have to be filed online.
The new HM Revenue & Customs 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 March 31, 2010, which are filed with HMRC after April 1, 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.
The effect is that 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 the approved software.
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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, is ensuring that its software will prepare accounts and tax computations in iXBRL. Equally important, for companies that prepare their own figures using word processors and spreadsheets, we will also have software that will read and convert these documents.
Companies should seek advice from their accountants on how to prepare for the new system. For those who want a certain amount of breathing space, it is possible to push back the switchover by filing the 2010 Corporation Tax return early, ahead of the April 1, 2011, deadline.
In the longer term, it’s important to ensure that your company or its accountant has both the necessary software and expertise in place.