Mandatory iXBRL filing could increase burden on SMEs
Wednesday 27th July 2011
For the first time, businesses filing a corporation tax return this year must do so online, using an HMRC-specified format called Inline eXtensible Business Reporting Language (iXBRL). Though perfectly legible on-screen, iXBRL documents contain hidden tags so they can be read automatically by HMRC computers.
The biggest impact for most businesses will be on the preparation of the financial statements, which are not just part of the tax return but must also be sent to Companies House, shareholders and, possibly, third parties such as lenders. For small and medium-size companies who do not have the in-house expertise to prepare statements in the new format, this will be an additional administrative burden they can do without.
HMRC is offering free software for companies with simple accounts, but functionality is limited – for example, it cannot be used if the company is audited, has leased cars or receives income from property. Those unable to use it must buy commercial software to prepare their financial statements in iXBRL or pay their accountants to do it for them.
Unsurprisingly, given these constraints, HMRC has released figures showing that, in April, a third of the 67,000 returns filed required re-submission.
The good news is that HMRC have stated their approach is “to advise and support people to get it right, not to reject returns or penalise people for getting things wrong”. In fact, for returns submitted and accepted, there is no legally sanctioned penalty for missing deadlines or incorrect tagging unless the errors lead to a loss of tax. HMRC acknowledge that “this is very difficult to envisage – particularly where the human readable format of the iXBRL documents contains correct and accurate information”.
However, none of this reduces the challenge of finding a cost-effective way to re-format your business’s financial statements in HMRC’s new language. Please contact your usual Buzzacott advisor for more information or advice.
Buzzacott LLP is an HMRC-recognised Managed Tagging Provider, and can convert your financial statements from, say, a Microsoft Word document into the iXBRL-tagged html document required by HMRC.
Katie White