Mandatory online filing of corporation tax returns
With effect from 1 April 2011, it is mandatory for most corporation tax returns to be filed online with HMRC, with supporting documents presented in iXBRL format. This includes the annual accounts and other supporting computations.
The biggest impact these changes will have on clients relates to the annual accounts. Where annual accounts have previously been produced in Word format, we can prepare them using our Final Accounts Production software, which automates much of the iXBRL conversion. Many clients have asked us to do this, but this approach is not suitable where:
- We are auditors and the company is a listed company, or a significant affiliate of such an entity, as Ethical Standards prohibit us from preparing the annual accounts which are then subject to audit (although we can tag them for iXBRL)
- The company wishes to continue preparing their annual accounts in house
- The company has non-standard format annual accounts, such as insurance companies and Lloyd's Corporate Members.
Specialist conversion software
For companies with non-standard format accounts or those not produced using Final Accounts Production software, we have invested in specialist iXBRL conversion software, which enables us to convert accounts originally prepared in Word or Excel to the iXBRL format. But this process is not automated to the same extent as the Final Accounts Production software and requires more time to prepare the converted accounts.
iXBRL accounts can only be prepared based on final approved accounts. We believe that companies will, for now, only require iXBRL accounts to support the company tax return. Until Companies House requires accounts to be filed in the same format as HMRC, we will provide clients with the iXBRL accounts document for approval at the same time as their tax return.
We will be writing to clients with revised terms of engagement in relation to corporation tax services, to include the iXBRL accounts preparation, in the coming months.
iXBRL rule exceptions
Not all organisations are obliged to prepare the supporting accounts and computations in iXBRL. Exclusions include certain charities and companies that are dormant or in administration. Neither does the rule apply in respect of tax returns for accounting periods ending on or before 31 March 2010. UK branches of companies incorporated overseas may also avoid the requirement to present accounts in iXBRL.
Budget changes delay
HMRC will not implement 2011 Budget changes to its system until the autumn, in particular those changes relating to the reduction in the rate of corporation tax from 1 April. As computations are validated before being approved by HMRC, this means that companies with periods ending after 31 March 2011 are currently unable to submit returns to HMRC. This situation should be resolved by November 2011, but is likely to recur in future years.
If you have any queries about how the new rules will affect your company, please contact your engagement partner, or our corporate tax partner Chris Riley on 020 7516 2427 or by email criley@littlejohnllp.com
