The HMRC iXBRL mandate came into force in the UK on the 1st of January 2010, making it compulsory for businesses to send their Company Tax Returns online using iXBRL for accounts and tax computations. Subsequently, paper and PDF submissions of these reports to the HMRC came to an end with the exception of unincorporated charities, clubs, and societies who are still able to use PDFs for their accounts but still need to use iXBRL to tag their computations.
From April 1, 2011, companies incorporated in the UK must also make Corporation Tax and related payments electronically. This includes penalties for not filing Corporation Tax on time and any interest charged on overdue Corporation Tax. In this blog, we will explore some of the options companies have when it comes to iXBRL conversion of their accounts and calculations and offer some expert tips on how to accomplish a high-quality filing with the HMRC.
Whether an organization is eligible to file a Corporation Tax Return with the HMRC is characterized by a notice to deliver a Company Tax Return and is applicable to loss-making companies as well. Let’s begin by taking a quick look at all the entities in the UK to which the HMRC iXBRL mandate is applicable. Two broad groups of organizations need to file their accounts and calculations with the HMRC in iXBRL.
Registered Companies
Corporation Tax Returns must be filed by limited companies registered in the UK or by any foreign company that has a branch or office with a registered address in the UK.
Unincorporated Trading Companies
Trade associations, housing associations, member clubs, societies, and cooperatives are some of the companies that must file with the HMRC in iXBRL.
In addition to these, the HMRC makes a service available for unrepresented companies that have straightforward tax calculations on its website. We will explore this in a bit more detail in our next section.
One important detail of note is that even if companies employ external professional services to prepare their accounts and calculations, the responsibility to submit an iXBRL return to the HMRC lies with the director of the company.
In our next section, we explore some of the options companies have in order to prepare their iXBRL filing for submission to the HMRC’s online service.
iXBRL Filing Options
When it comes to iXBRL filings with the HMRC, companies in the UK have a few different paths they can explore. There are several factors that need consideration when deciding on the right course of action including company size, the complexity of accounts and calculations, existing systems and processes, and dedicated resources at hand to name a few.
Broadly speaking, there are 3 main avenues for companies for converting their accounts and tax calculations into iXBRL for submission to the HMRC.
Small Companies with Simple Accounts
For smaller unrepresented companies that do not use dedicated accounting software, the HMRC provides a free online service that enables filing Company Tax Returns using specially formatted templates for accounts and calculations. More information on eligibility can be found here.
Another optional joint filing service is provided by HMRC and Companies House for submission of full or micro-entity accounts over the internet as part of the Company Tax Return to HMRC as well as Companies House (which also accepts an abridged version).
While extremely convenient for smaller businesses, the drawback of using this service is that if the company’s financial reports are not in the format provided by the template, they cannot use it. More information on how to register and use this service can be found here.
Companies using FAP and Tax Preparation Software
Companies that utilize Final Accounts Production (FAP) or tax preparation software will need to check with their software vendor to understand if it offers the capability to deliver a fully compliant Company Tax Return. HMRC makes available a list of software and service providers that have successfully tested with them to demonstrate the capability to produce one or more elements of a Company Tax Return.
An important consideration for companies is to identify whether accounts and tax computations are produced at different times by different teams. Since both must eventually be filed in iXBRL, it is wiser to ensure that they are directly produced in iXBRL when first completed, instead of converting them ex post facto. However, internal processes differ from company to company, so the sequence in which these tasks are performed depends on a number of factors.
Companies Creating Accounts Manually
A lot of larger companies still use Excel, Word, or similar spreadsheet and word processing software to prepare their accounts and auxiliary documents. These companies have two options when it comes to iXBRL conversion of their accounts and calculations.
- They may elect to use software that can bring in data from Excel or similar programs and convert data into iXBRL. This may involve some level of manual effort to identify and apply tags correctly and is dependent on the software solution chosen by the company.
- They may outsource the entire process to a managed tagging service company that accepts traditionally prepared accounts and converts them to iXBRL with the appropriate tags. This is a cost-effective solution and one that usually doesn’t require companies to drastically change their own processes.
In our last and final section, we provide 7 expert tips for firms looking to convert their company accounts and calculations into iXBRL for submission to HMRC.
7 Expert Tips for UK HMRC iXBRL Conversion
Here are 7 quick tips from our in-house experts that companies can use to tackle iXBRL filings with HMRC leading to a high-quality error-free filing.
- Know the Components of the CT600 Form – the CT600 is a Company Tax Return form and is used to pay Corporation Tax that is owed by a company to HMRC. It contains information related to accounts, computations, reports, and statements of the company filing it. More information on this form can be found here.
- Find out What Options are Available for Filing – as previously mentioned, companies have a few different paths to choose from, for accomplishing their iXBRL filing with HMRC. it is wise to deliberate on the best course of action via internal discussions and come to a decision on how best to proceed taking all factors into account.
- Find the Right Solution Provider for your needs – it is imperative for companies to find a solution that works in conjunction with their existing processes and causes minimal disruption. For this, companies must identify pain points and prioritize what is most important to them from a features standpoint.
- Understand Available Taxonomies – taxonomies are dictionaries of concepts that are used to tag facts and figures in an iXBRL report that is submitted to the HMRC. There are broadly two types viz. the FRC accounts taxonomy for companies with 5 accounting frameworks under it and one for charities preparing their statements under SORP*.
- Avoid Basic Tagging Errors – these include rounding errors, missing dates, mismatches in context entity identifiers and company reference numbers, and missing UTR reference tags among many others. Working with external service providers who can provide expert guidance on specific issues is the best way to go for quick redressal.
- Establish Best Practices to Make Filings Smooth – companies can benefit from setting up standardized internal processes and nominating dedicated resources for filing to ensure a good level of quality, accuracy, and consistency. This can be achieved by way of templates, trained staff, and proactive engagement among other things.
- Choose a Solution with a Built-in Validator – a solution that comes with a built-in validator is capable of ensuring that the iXBRL filing with HMRC is free of errors and can pass with minimal changes. A solution offering an XBRL International (XII) certified validator provides additional assurance to companies in this respect.
*SORP – Statement of Recommended Practice