Keep Up! Important Corporation Tax Changes

Keep Up! Important Corporation Tax Changes
Many company owners will be aware that Corporation Tax Returns must be filed online from 1 April 2011. But there is more to this, both in terms of who is caught by the new rules and what is required.

Paying “Electronically”

Firstly, from 1 April 2011, any payments of Corporation Tax must be made electronically.  There are various methods to pay electronically, such as over the Internet, by Direct Debit, CHAPS, debit or credit card... and apparently by Bank Giro or at the Post Office, according to HMRC’s website.  In fact, the only payment method to which HMRC appears to object is a simple cheque in the post!

For further information, see:

Filing Electronically

From 1 April 2011, any Corporation Tax Return for a period ending after 31 March 2010 must be filed online. For those not used to filing online, it makes sense to try to ensure that where possible, the return is filed before this deadline, perhaps to postpone the inevitable for another year.

But even if you’re used to filing online, there is still the new required online filing format to deal with.

Filing Electronically Means iXBRL

Corporation Tax Online Filing has been around for many years. But from 1 April, the bar has been raised: the required format is iXBRL (‘inline eXtensible Business Reporting Language’).

The format basically applies to all parts of the return, including the financial statements and the computations.

This is not a simple thing to do:  it is practically impossible to complete without specialist software (and even some of the specialist accounting/tax software companies are struggling to manage the 1 April 2011 deadline). Ironically, it is likely that the accounts will be more difficult to convert to iXBRL format than the ‘tax’ part of the tax return.

Fortunately, HMRC has developed its own basic package to help those companies which have relatively simple tax and accounting affairs, which will help to ‘tag up’ all required parts of the return and incorporated it into its existing Corporation Tax Online Filing portal.

Who Has to File Corporation Tax Returns?

Not just companies! There are many other bodies which have to file Company Tax Returns, such as:

• Members’ clubs, societies and associations

• Voluntary organisations

• Religious communities

• Co-operatives

Many of these bodies have minimal financial means and do not have tax agents. The changes may prove an unwelcome surprise to many of these bodies – although many will not have to comply with all of the normal requirements.

Practical Tip

HMRC has long said that it will operate a “soft landing” approach for the first couple of years of the new regime. This means that there will be less demanding criteria – for instance, the list or ‘taxonomy’ of items in accounts which must be ‘tagged’ in iXBRL has been significantly reduced for the first couple of years. Most importantly, in a recent announcement, HMRC has said that they will not penalise companies that make a ‘reasonable’ attempt to comply with the iXBRL requirements.

Of course, there may then be disagreement about what constitutes a ‘reasonable’ attempt!

By Lee Sharpe