Companies and unincorporated associations are required to self assess their liability to corporation tax by way of an annual return and pay any tax due. HM Revenue & Customs (HMRC) are changing how corporation tax returns and associated documents are submitted and how payments of corporation tax can be made.
What is changing?
From 1 April 2011 HMRC will no longer accept paper returns and annual accounts for corporation tax purposes. All documents will have to be submitted in an electronic format called iXBRL that applies electronic codes, known as tags, to the information while still producing the documents in a human readable form. HMRC have specified what initially needs to be tagged and this list will increase in size until April 2013 when full tagging of all items will be necessary.
These changes will allow HMRC to carry out a computerised risk assessment process and to reduce the staff needed to process the returns.
iXBRL is an internationally accepted format for financial information and Companies House have also indicated that, from 2013, they will only accept accounts and financial statements in iXBRL.
Corporation tax computations and annual accounts will have to be prepared in the iXBRL format. At Ritson Smith we have invested in software solutions to ensure that the implications for businesses are minimised and there will be no changes to the format of the final readable documents. However, and especially in the first year, there will be a need to manually tag some information. Our accounts and tax departments are already doing this quickly and efficiently to ensure the accuracy of our clients’ tax returns while minimising any additional costs.
HMRC have promised to adopt a “soft landing” approach until 2013 and have said that they will not take any action where a reasonable effort has been made to tag the returns. Therefore there should not be an increase in the number of checks carried out as a result of these changes.
Paying Corporation Tax
HMRC are also reducing the options for paying corporation tax. You will no longer be able to pay by posting a cheque. HMRC will accept electronic and internet based payments and you will still be able to pay at your bank or at the Post Office.
We have produced a helpsheet to help companies through the corporation tax payment process.
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