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Getting to grips with electronic tax filing

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19th Oct 2009
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What do the changes to electronic filing on corporation tax mean for accountants, their clients and software providers? Sage’s Andy Laver explains.

The first implementations of recommendations from the 2006 Carter Report have long since filtered through thanks to a mixture of phased incentives and obligations to file VAT and PAYE documents electronically. November sees the next milestone for electronic filing following Carter’s recommendations - the new mechanism for corporation tax filing at HMRC supporting iXBRL accounts.

Initially this will work as an alternative choice to the current way that corporation tax returns are submitted, as a PDF attachment. From April 2011 iXBRL will become the only acceptable method for electronic filing of accounts with HMRC as part of a corporation tax submission.

Although no immediate action is required from taxpayers, it is recommended that accountants pilot iXBRL filing during the ‘voluntary’ period in 2010 to familiarise themselves with software changes and review internal processes before the system goes live.

Understanding iXBRL
The obligation to file company tax returns and computations (including a set of iXBRL statutory accounts by April 2011) is the most far reaching of the Carter changes and the one causing most concerns, due to the late clarification of requirements and short timescale left to implement.

The current filing mechanism, which reads the tax elements of the submission directly into HMRC systems, means that accounts attached as a read only PDF document need to be manually re-keyed into HMRC systems. The introduction of XBRL will bring accounts into line with tax computations and returns, enabling HMRC data entry staff to be redeployed to undertake more benchmarking and enquiry work.

Inline XBRL (iXBRL) is a method of presenting the XBRL data in a human readable form, on paper or screen, which involves ‘tagging’ specified numbers, notes and headings in the accounts to identify what each piece of data is, where it is on the page and how it looks. Under UK GAAP there are roughly 5,500 possible items to tag and this rises to around 12,000 items under IFRS.

For the software industry (including Sage), the knowledge that iXBRL was coming was not new. However, the expanded scope of the requirement to deliver a full set of iXBRL accounts is completely new. It is a huge task to complete in a very short timescale. Delivering iXBRL accounts using a single method across all our accounts production products is definitely the focus in our accounts production team, to ensure we can offer clients a comprehensive solution by summer 2010.

I was at an accountancy practice’s conference recently talking to representatives from a number of large corporate clients and the vast majority were not aware of the scope of these forthcoming requirements for online filing or the timetable. This is understandable considering that HMRC only clarified the extent of the changes in April, which hasn’t left software providers (let alone taxpayers) much time to absorb them. Even so, with good planning everyone should be able to implement them successfully.
 

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