In March 2006, the Lord Carter of Coles' Review of HM Revenue & Customs
(‘HMRC’) Online Services was published to coincide with Budget day. The
Government welcomed his report, which was based on wide-ranging consultation
with stakeholders, and accepted the recommendations in full with little
Budget 2007 has taken steps to advance these recommendations, making a
number of modifications based on input over the last 12 months, and will
introduce the necessary legislation to bring areas of this into law in
Finance Bill 2007.
The recommendations will come into effect in stages from 2008 onwards
subject to the right services being in place. This is intended to give HMRC,
businesses, agents, software developers and taxpayers time to prepare for
The review recommends an aspirational goal for HMRC that it should aim
for universal electronic business tax returns by 2012. It should also aim
for universal electronic individuals’ tax returns from IT literate groups by
the same date.
The main elements of the recommendations are as follows:
Corporation tax | Income tax | VAT |
Enquiry window | Risk rules
All companies will be required to file their company tax returns online,
using eXtensible Business Reporting Language (‘XBRL’), and make payments
electronically. This will be effective for all companies for accounting
period ending after 31 March 2010, where the return is submitted after 31
March 2011. This is a deferment of 12 months compared to the proposals last
From 2011, electronic filing will consist of an XBRL submission of the
company statutory accounts and tax computation with an XML based CT600 form.
Currently HMRC provide an online filing service for completion of the
CT600 return using XML, with most software including PDF attachments for
filing of the accounts and computation. HMRC have made the facility for
including XBRL computations in the filing, but has been implemented by few
vendors due to its complexity and current limitations.
We believe that HMRC still need to address the significant challenge of
moving from a free format tax computation to a more rigid XBRL tax
computation, while retaining the ability to handle the wide variety of
company circumstances and all necessary disclosures. It is interesting to
note that other tax regimes such as VAT and other countries such as The
Netherlands and the US have fixed format submissions which do not face this
Companies which currently use Excel or other methods to prepare their
company tax return and they will therefore need to consider using tax
software or an agent to file their company tax return.
The Deloitte Abacus software already supports electronic filing and is
relied upon by over 65% of the FTSE 100. We are currently working with HMRC
on the implementation and impact of these proposals.
There are a number of significant changes to the Income Tax Self
Assessment (‘ITSA’) regime which includes personal tax, partnership tax and
trust tax returns.
For ITSA taxpayers, for 2007-08 and subsequent returns, the filing period
for paper returns will be reduced to six months - the new deadline will be
31 October - and the filing period for online returns will remain as 31
January following the end of the tax year. From the same tax year,
substitute returns will no longer be accepted and taxpayers and agents will
only have the options of filing electronically or completing the return by
We welcome the inclusion
of Lord Carters’ revised recommendation on filing dates, which
previously recommended a change to the current 31 January deadline for
From our consultations with HMRC, they have currently done well in
addressing issues raised by agents and software developers that currently
act as barriers for taxpayers, and agents, to use the online services.
We still believe there are a large number of issues raised that have not
been answered. It is essential that these are addressed satisfactorily over
the next few months to give confidence in the service and make a smooth
transition to the new regime.
Large and medium sized businesses will be required to file their VAT
returns online, and make payments electronically, for accounting periods
starting after 31 March 2008.
The seven additional calendar days to submit VAT returns online will
remain in place until at least April 2010
Historically, only 7% of traders filed online and this was partly due to
the fact that the service involves filing through a web site and cannot
be integrated into VAT reporting systems. The availability of an
improved VAT Online service later this year and this will allow traders
using third party systems such as Deloitte Abacus VAT to automate the
entire VAT reporting process.
The measures introduce a change to the enquiry windows for ITSA and
company tax returns, which run for 12 months from the filing deadline and
which currently act as a disincentive to early filing.
The Budget is bringing in measures to link the enquiry window to the date
a return is actually filed. This measure will be effective for ITSA for
2007/08 and subsequent years returns, and for CTSA for accounting periods
ending after 31 March 2008.
We welcome the move to linking the enquiry window to the date the return
is submitted. The move to introduce this for CTSA before the move to
compulsory electronic filing is a welcome and sensible measure.
The report also recommends that the HMRC share with software vendors some
of the risk rules used to select cases for enquiry.
We welcome this recommendation remaining in the proposals. In our
consultations with HMRC, this appears to be a difficult area for them to
address, so it will be interesting to see how this is brought forward in the
XML - eXtensible Markup Language, the industry standard language for
describing data in a universal way. XML is now almost universal as the data
exchange format on the internet.
XBRL - eXtensible Business Reporting Language, a language based on XML
specifically designed to report on financial data.