From 1 April 2011, some charities will need to file their tax computations and accounts using iXBRL.

iXBRL stands for Inline eXtensible Business Reporting Language and is a computer language enabling the transfer of data from one computer to another. HMRC requires that all companies file their tax computations and accounts in this format, from 1 April 2011 for accounting periods ending after 31 March 2010.

This means that accounts and tax computations will need to be translated into the iXBRL format, a process referred to as tagging. Tagging of accounts can be done in a number of ways, but we expect that the most common will be:

  • converting accounts prepared in Word or Excel to the new format
  • preparing the accounts using accounts production software, which can also generate accounts in iXBRL format.

Small companies with straightforward accounts might also choose to use HMRC's free accounts template software.

The cost of tagging accounts will be dependent on the complexity of the accounts, the urgency of the conversion and the format of the accounts that need to be converted. Based on our market research, recurring annual costs for a relatively small charity are likely to be in the region of £500 for each set of accounts; additionally, some set-up costs might be incurred.

Most charities do not have to file tax returns every year and therefore will not need to have their accounts tagged every year. So changing your accounts production process to comply with this requirement might be an unnecessary expense. On the other hand, we understand that most conversion processes from, say, Microsoft Word 'learn' from one year to the next, so a lack of continuity in tagging may mean that it costs more per set of accounts.

Some good news for smaller charities

HMRC has recently announced an exemption for small charities, saying it recognises that the accounts template its free software provides is not suitable for them and that 'for a transitional period' small charities would be able to submit their accounts via PDF. For the purposes of this exemption 'small' means that group incoming resources must be less than £6.5m.

Not for trusts, yet

iXBRL reporting only applies to charitable companies. Trusts are liable to income tax and therefore file income tax returns, which are not (yet) required to be filed in iXBRL format.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.