In the UK, businesses are required to file their financial statements with HMRC in iXBRL (inline eXtensible Business Reporting Language) format. iXBRL is a form of digital reporting that combines human-readable HTML with machine-readable XBRL data. It makes the financial information accessible for both HMRC and software systems, streamlining tax processes and compliance. If you’re a business owner or accountant, learning how to convert accounts into iXBRL format and file them yourself can save you significant costs and time.
This article offers a detailed, step-by-step guide on how to convert your accounts to iXBRL format and submit them to HMRC on your own.
What is iXBRL?
iXBRL is a version of XBRL that presents financial information in a format that can be both read by people and processed automatically by computers. Introduced by HMRC in 2011 as part of the ‘Making Tax Digital’ initiative, the mandatory use of iXBRL ensures better accuracy in tax filings, reduces errors, and improves the transparency of business finances.
Financial data is tagged using standardized taxonomies so that HMRC’s systems can interpret it correctly. This tagging is invisible to the human eye but critical for automated processing. Thus, when you submit financial statements in iXBRL format, HMRC receives your data in a consistent and understandable manner.
Why Convert Accounts to iXBRL?
HMRC requires that all financial statements and tax computations must be filed in iXBRL format for Corporation Tax. Non-compliance can result in penalties and delayed processing. Converting your accounts into this format is therefore essential.
While some companies outsource this task to specialized firms or accountants, many small businesses choose to handle the conversion themselves. Doing this in-house can save money and allow for more control over your financial data.
Steps to Convert Accounts to iXBRL Format
Here’s a step-by-step guide on how to convert accounts to iXBRL format and file them with HMRC on your own.
Step 1: Prepare Your Financial Statements
The first step is to ensure that your financial statements are complete, accurate, and ready to be filed. Financial statements typically include:
- Profit and loss statement
- Balance sheet
- Cash flow statement
- Notes to the accounts
If you’re using accounting software like QuickBooks or Xero, make sure that all financial records are up-to-date. Once everything is finalized, you’ll be ready to move on to the conversion process.
Step 2: Choose a Conversion Method
There are several ways to convert your accounts into iXBRL format. You can choose from the following methods:
- Use Accounting Software with Built-In iXBRL Conversion: Some accounting software packages automatically generate iXBRL files. For example, Xero, QuickBooks, and Sage offer iXBRL tagging as part of their premium plans. If you’re using such software, you can directly export your accounts in iXBRL format.
- Use a Dedicated iXBRL Conversion Tool: If your accounting software doesn’t support iXBRL, you can use standalone iXBRL conversion software such as CoreFiling Seahorse, IRIS, or Accounts Production software from VT. These tools guide you through the process of tagging your financial statements and converting them to iXBRL.
- Manual Tagging: This method is more technical and may require some knowledge of XBRL. Tools like HMRC’s free online iXBRL tagging tool (though limited in functionality) can assist you in manually tagging key items in your accounts. Manual tagging can be labor-intensive but is useful for smaller, less complex companies.
Step 3: Tag Your Financial Data
Once you have selected your preferred method, the next step is to tag the financial data. This is where you assign specific XBRL tags to each part of your financial statement so that HMRC’s systems can process it accurately.
Automated Tagging with Software
Most modern accounting software or iXBRL conversion tools have built-in tags based on UK GAAP or IFRS (International Financial Reporting Standards) taxonomies. The software will suggest tags for each item on your financial statement, which you can review and approve.
For example, “Turnover” might be tagged with a specific identifier from the HMRC taxonomy. If using an automated solution, review the suggested tags for accuracy to ensure that no important financial data is missed or misrepresented.
Manual Tagging Process
If you’re manually tagging, you need to reference the correct taxonomy for each element of your financial data. HMRC provides taxonomies for different accounting standards, and you’ll need to go through your financial statements line by line, tagging items such as “Revenue,” “Operating Profit,” “Tax Expense,” and so on.
Manual tagging requires precision and careful verification to ensure the correct taxonomy is applied.
Step 4: Validate the iXBRL File
Before submitting your iXBRL file to HMRC, it’s crucial to validate the file for accuracy and compliance with HMRC standards. Many conversion tools come with built-in validation checks to ensure your document meets the requirements.
Validation will confirm whether all necessary tags are in place and that the file structure adheres to iXBRL standards. If there are any errors, you will receive prompts to correct them before submission.
Step 5: Submit Your iXBRL Accounts to HMRC
Once you’ve validated your iXBRL file, it’s time to submit your accounts to HMRC.
- Log in to HMRC’s Online Service: You can submit your iXBRL accounts directly through the HMRC online services portal. Ensure that you have access to your business’s HMRC account, which will allow you to file Corporation Tax returns.
- Attach iXBRL Files: In the section for attaching supporting documents, upload your iXBRL accounts file along with any other necessary attachments, such as your tax computation.
- Submit and Confirm: After uploading, double-check all the details and click submit. You should receive a confirmation that your submission was successful. Keep this confirmation as proof of compliance.
Step 6: Keep a Record for Future Reference
After submission, it’s essential to keep a record of your iXBRL files and confirmation receipts. This documentation may be needed for future audits or inquiries by HMRC. Store your files securely, both digitally and physically, for the recommended period of six years.
Common Pitfalls to Avoid
Here are some common mistakes to avoid when converting and submitting accounts in iXBRL format:
- Incorrect Tagging: Make sure that each item in your financial statement is tagged correctly based on HMRC’s taxonomies. Incorrect tagging can result in the rejection of your submission or incorrect tax assessments.
- Invalid iXBRL File: Validate your file before submission to avoid potential errors in the HMRC system. Most conversion tools offer validation checks, so ensure that you use them.
- Missing Deadlines: HMRC imposes strict deadlines for filing Corporation Tax returns. Missing the deadline could result in penalties and interest charges.
Final Thoughts
Converting accounts to iXBRL format and filing them with HMRC might seem daunting, but with the right tools and approach, it can be manageable. By following the steps outlined above, you can ensure that your financial data is accurately tagged, validated, and successfully submitted to HMRC. Doing this yourself not only saves money but also gives you greater control over your tax filings.