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Tax’s professional bodies have expressed dismay that HMRC plan to proceed with the compulsory use of the iXBRL format.
The department has published guidance on how it will deal with difficulties that arise from the April move to online submission of company tax returns
It states that the Revenue expect businesses ‘to make a reasonable attempt to comply with corporation tax online filing, including iXBRL tagging’, but promises to be ’reasonable about difficulties and mistakes’.
The guidance goes on to insist that companies ‘aim for XBRL tagging of computations and accounts to be completed to the level of the XBRL minimum tagging lists, which HMRC published last year’, and that ‘returns will clear HMRC’s electronic gateway as long as a small number of key items are tagged’.
The department says, given that software suppliers are aware of the validation items, users of commercial accounts production products that have passed the taxman’s recognition procedures will find the items are tagged automatically.
The Revenue continues: ‘Only in very extreme circumstances would a return that clears this gateway be rejected later because of poor tagging. This would only happen where HMRC believe there has not been a reasonable attempt made to XBRL tag a part of the submission and they would discuss this with you first.
‘HMRC will not reject any return where you have made a reasonable attempt to comply with the iXBRL requirement. For example they will accept annual accounts which have:
- Automatic tagging produced by an accounts production software package but where additional manual tagging of free-form items hasn’t been completed.
- Been “manually tagged” and are complete and accurate as far as is reasonably possible.’
Rejection for ‘tagging reasons’ is extremely unlikely, says the guidance, but if it does happen, and the return is not re-submitted on time, penalties for late filing remain automatic. However the penalties can be appealed under the reasonable excuse provisions where genuine obstacles to filing online on time have been encountered.
HMRC say they will be particularly sympathetic in the first two years to such appeals. ‘For returns submitted and accepted, [we] will not penalise missing or incorrect tagging.
'There is no legal provision for such a penalty unless the errors have led to a loss of tax. That is very difficult to envisage - particularly where the human readable format of the iXBRL documents contains correct and accurate information.
‘Unless there is tax at risk, deficiencies in tagging will be treated as an education issue to help taxpayers and agents get things right in the future.’
Enquiries will not be opened ‘solely or mainly to check the quality of XBRL tagging’, although incorrect or missing tags may trigger a risk-assessment rules.
Clients of software suppliers who are late providing the required products should contact HMRC by email. The department may suggest using its free product if applicable, or ‘agree to submission with minimal tagging, submission in alternative format, or delayed submission'.
It says: ‘HMRC will not enforce any late submission penalties where late software delivery or other IT issues have caused the delay, and they have agreed to late submission.’
Remarking that ‘HMRC are not for turning’, the ICAEW Tax Faculty said, ‘The problems for some businesses lie with making an iXBRL file of the accounts. For reasonable excuse to apply, the company or its agent must have tried to comply. Clearly, if there is a problem with the company’s usual software supplier, they will have done their best and will therefore have the necessary excuse’.
Donald Drysdale of the Institute of Chartered Accountants of Scotland (ICAS) said he was disappointed. Last week, the ICAS and other tax-related bodies sent a joint letter to the Exchequer secretary to the Treasury, David Gauke, calling for a review of the timetable for iXBRL-based company tax-filing.
Mr Drysdale said Mr Gauke is ‘insisting that mandation [sic] of online filing in iXBRL will go ahead as planned on 1 April’, and added that the Exchequer secretary has ‘expressed the wish that any transitional issues should be managed effectively, emphasising that no one who has made a reasonable effort to comply will be penalised and that anyone with real difficulties should contact HMRC’.
While the new guidance offers ‘some comfort’, it does raise problems of interpretation, said Mr Drysdale who wondered how ‘reasonable attempt’ will be interpreted?
He predicted more guidance from HMRC shortly, possibly in the form of FAQs; the ICAS is currently approaching its members for the questions they would like answered.
