Tax professionals have voiced their disappointment at the Government’s decision to press head with the introduction of the new iXBRL system for filing company accounts.
The new system is due to come into effect as from 1 April 2011.
iXBRL is the computer language in which most corporation tax returns are due to be submitted from that date.
Under the changes, all company tax returns sent in from April 2011 must be filed online for accounting periods ending after 31 March 2010 and in the Inline XBRL or iXBRL format.
Corporation tax payments must likewise be made electronically from April 2011.
A number of leading accountancy and professional tax bodies recently wrote to David Gauke, the Exchequer Secretary, urging a delay in the implementation of the new system.
In his reply, the Minister reiterated plans to continue with the both the introduction and the timetable.
He did, however, promise that HMRC will take an understanding approach during the first two years of the new system. Companies that make reasonable errors in their corporation tax submissions will not face any penalties.
Anthony Thomas, deputy president of the Chartered Institute of Taxation, commented: ”This decision will come as a blow to some businesses and members of the professional bodies who are struggling with implementation due to the insufficiency of time between software arriving and the legislation commencing on 1 April 2011.
“However I welcome the minister’s recognition that there will be a soft landing for the changes, with HMRC ‘sympathetic to any difficulties caused by lack of familiarity with new software or delays in receiving software.’ This is a positive step. HMRC have also agreed to provide a dedicated email address for agents and businesses to contact them where they are unable to produce iXBRL accounts.”
Simon Braidley, president of the Association of Taxation Technicians, added: “The ATT, along with the CIOT and other professional bodies, will continue to work with HMRC with a view to any guidance being as clear as possible, so that members facing problems through no fault of their own encounter minimal additional burdens in terms of dealing with HMRC and penalties.
“The professional bodies will be doing all we can to monitor the situation and raising with HMRC any new issues which come to light. To enable us to do this we urge members to report to us any issues they face.”
HMRC has said that it expects businesses “to make a reasonable attempt to comply with corporation tax online filing, including iXBRL tagging”, although it pledged to be “reasonable about difficulties and mistakes”.
In its guidance, HMRC continued that companies should “aim for XBRL tagging of computations and accounts to be completed to the level of the XBRL minimum tagging lists, which HMRC published last year”, and that “returns will clear HMRC’s electronic gateway as long as a small number of key items are tagged”.
HMRC added: “Only in very extreme circumstances would a return that clears this gateway be rejected later because of poor tagging. This would only happen where HMRC believe there has not been a reasonable attempt made to XBRL tag a part of the submission.”
HMRC will not reject any return where a reasonable attempt has been to comply with the iXBRL requirement. The tax authorities will, for instance, accept annual accounts which have automatic tagging produced by an accounts production software package but where additional manual tagging of free-form items hasn’t been completed, or accounts which have been ‘manually tagged’ and are complete and accurate as far as is reasonably possible.
HMRC said they will be particularly sympathetic in the first two years: “For returns submitted and accepted, we will not penalise missing or incorrect tagging. There is no legal provision for such a penalty unless the errors have led to a loss of tax. That is very difficult to envisage – particularly where the human readable format of the iXBRL documents contains correct and accurate information.
“Unless there is tax at risk, deficiencies in tagging will be treated as an education issue to help taxpayers and agents get things right in the future.”
More details can be found at http://www.hmrc.gov.uk/ct/mandatory-online-filing.pdf