Are you ready for iXBRL?

From 1 April 2011, all corporation tax returns need to be filed online in the new iXBRL electronic format. iXBRL is an electronic tagging system that allows corporation tax returns to be read electronically and for HMRC to collect and analyse the numbers submitted automatically.

Companies must also file their annual accounts in iXBRL format. HMRC has produced taxonomies, which are dictionaries or reference lists that set out the available tags – currently 4,375 – to be used in a set of financial statements when companies file electronically. Additional taxonomies exist for companies preparing their accounts under International Financial Reporting Standards and for charities, which will fall into the regime if they are incorporated and asked to file a corporation tax return.

It is mandatory for companies to follow this procedure if their accounting periods end after 31 March 2010 and they file their tax returns after 31 March 2011. Some businesses may choose to file their tax returns earlier in order to avoid the new regime for a year. However, this will only provide a temporary reprieve as the system is here to stay. Moreover the shortened deadline may not be practical in any case.

It is important that you take steps to ensure that your business and advisers are prepared for these changes. If your company prepares its financial statements using either Microsoft Word or Excel, it will not be able to produce accounts in the new iXBRL format automatically and you will need to determine how to comply with this requirement. The three main options are as follows.

1. Purchase an iXBRL compliant accounts preparations package, of which there are currently very few available.
   
2. Purchase a package that will allow non-compliant accounting software to be tagged suitably for transmission.
   
3. Ask your auditors to do it for you. Whichever way your organisation decides to approach the issue, there will be added costs involved. Where Kingston Smith is responsible for preparing your accounts, tax returns and computations, we will produce all of the documents in iXBRL format using our specialist software.

In the longer term the intention is that companies will be able to file a single set of accounts in iXBRL format which will be used by both HMRC and Companies House. For the present, hard copy accounts should continue to be filed with Companies House in the usual way.

For further information on iXBRL, please contact your usual client partner.