iXBRL filings: Taxman to spare the rod

HMRC doesn't want fear of penalties to put companies off...

HMRC doesn't want fear of penalties to put companies off...

The tax authorities will adopt a lenient attitude to companies struggling to meet demands for filing tax returns online using a new data format.

All UK company tax returns filed from April 2011, which cover the accounting period ending after 31 March 2010, will have to be filed online using the Inline XBRL (iXBRL) data format.

XBRL stands for eXtensible Business Reporting Language. It refers to a way of tagging financial data so it can be automatically processed by software systems. Inline XBRL makes XBRL readable by humans - guaranteeing the layout and presentation of data looks the same for both the author and the person receiving it.

Last week, exchequer secretary David Gauke said HM Revenue & Customs (HMRC) was willing to accept technical problems as a reason for late iXBRL filing.

"HMRC has confirmed that if a deadline is missed because of implementation issues with iXBRL software, their well-established reasonable excuse provisions will apply," he said in a written answer to parliament.

iXBRL tax returns

HM Revenue & Customs will adopt a lenient attitude to companies struggling with filing iXBRL tax returns online
Photo: Shutterstock

Earlier this month UK accountancy bodies called for the April start date for iXBRL filing to be pushed back because of companies' problems with implementing iXBRL filing.

A guidance PDF published by HMRC this month suggests the agency will display leniency towards companies suffering teething problems with iXBRL filing.

It says: "HMRC wants to encourage people to make a reasonable attempt to submit iXBRL accounts and computations - without fear of penalties if the new iXBRL requirement isn't fully met first time.

"HMRC does expect you to make a reasonable attempt to comply with corporation tax online filing, including iXBRL tagging. But they understand that it is new and some people won't get everything perfect from day one. HMRC will be reasonable about difficulties and mistakes."

The document states that HMRC will not reject "any return where you have made a reasonable attempt to comply with the iXBRL requirement".

Examples of a "reasonable attempt to comply with the iXBRL requirement" include filings where software has automatically tagged items, but some free form items have not been manually tagged, and filings where it is felt that manual tagging has been carried out to be "complete and accurate as far as is reasonably possible".

"This means rejection for tagging reasons is extremely unlikely. But if it does happen, and the return is not resubmitted on time, penalties for late filing remain automatic," the document said.

"However, that penalty can be appealed under the reasonable excuse provisions where people have faced genuine obstacles to filing online on time. HMRC will be particularly sympathetic in the first two years to such appeals."

The benefits of having financial data in a computer-readable format such as iXBRL include reduced errors from the rekeying of financial data, faster analysis of the data and reduced costs associated with data processing and filing, according to HMRC.

HMRC has made free software available through its website which it says will help small companies complete iXBRL tagging, while it is expected that larger firms will need to use commercially available software.