HMRC’s recent announcement that it will not be issuing blank paper return forms and guidance notes (forms CT600 & CT600 Guide) with the ‘Notice to deliver a Company Tax Return’ from 1 July 2010 is a timely reminder that the deadline for the submission of tax return and accounts in iXBRL format is fast approaching. But a straw poll on the ICAEW ‘IT Counts’ site indicates all is not well, with around 8 percent prepared for iXBRL, 33 percent thinking about it and 25 percent not preparing at all. Gary Simon, FSN’s managing editor looks at the available technical options for automating the filing to HMRC.
In broad terms iXBRL compliance is divided into two halves, namely; CT600 Tax Returns and Accounts submission. For once the relevant authorities got it right and combined tax and accounts submissions under one umbrella. (It will be remembered that From 1 April 2011 onwards, all companies and organisations will have to file their Company Tax Return online in iXBRL format for any accounting period ending after 31 March 2010. Additionally, organisations that have to prepare accounts under the Companies Act 2006, must file accounts and computations in iXBRL.)
XBRL (eXtensible Business Reporting Language) is virtually a global standard for the electronic tagging and submission of financial data to regulatory authorities. It is widely used throughout the world by regulators who benefit from digital filing, the ability to automate their processes and the facility to analyse vast amounts of corporate data. The benefits to organisations submitting data are less obvious but in time the availability of accounts in a standard XBRL format will eventually help companies, fund managers and even individual investors analyse and compare the performance of companies across the globe (provided they adhere to a common accounting standard – such as IFRS).
A slight twist in the implementation of XBRL in the UK is that it requires the adoption of a specific enhancement of XBRL called iXBRL or in-line XBRL which allows the same submission to be viewed in machine readable or human readable format in the same document - rather like electronic ‘skins’. By toggling between the two formats an experienced user can view and verify that a set of accounts in HTML format is correctly underpinned by an appropriate (relevant) set of XBRL tags.
So how do you submit iXBRL tax returns and accounts. Well HMRC has put a lot of store by the IT industry coming up with the solutions although for SMEs with straightforward requirements HMRC has its own solution - a template which can be downloaded from its website and completed like a normal tax form. Behind the scenes the standardised input will be converted into iXBRL format. Small companies and their accounting advisors will be readily able to use this capability. Furthermore, in limited circumstances HMRC will accept a PDF submission of accounts.
It seems that the CT600 side of the house is well established with a number of major vendors of Tax packages developing the required functionality. Although suppliers are not required to submit their applications for testing with HMRC a number of them have and the list includes notables such as, IRIS, Sage, CCH Software and Tax Computer Systems. But there appear to be worryingly few commercial solutions that have submitted solutions to HMRC, that handle the preparation of company accounts in iXBRL format.
The solutions providers fit into three main camps. Firstly, “Integrated Software Applications” - these applications combine the production and submission of a CT600 with the functionality to produce iXBRL Accounts and/or iXBRL Computations. Secondly, “Managed Tagging Services” – rather than you having to buy software and tag accounts yourself, some providers are offering a ‘tagging service’. These services take your non iXBRL Accounts/Computation and apply the appropriate XBRL tag to each data item then provide you with an iXBRL version of your Accounts/Computation that can be incorporated into a CT Return for submission. Finally, “Conversion Software Applications” – these applications take word processor or spreadsheet-based Accounts and allow you to apply an appropriate XBRL tag to each data item. Depending on the application the tagging process will be either manual or partially automated. These applications then provide you with an iXBRL version of your Accounts/Computation that can be incorporated into a CT Return for submission.
Integrated Software Applications is the area of concern. At the time of writing only one supplier, Forbes Computer Systems Limited, was listed by HMRC as capable of producing iXBRL accounts and computations. So where are all the packaged vendors of accounting and business systems? Some commentators have argued that given other types of solutions available it is not necessary to incorporate iXBRL accounts production in mainstream accounting packages, but of course the failure do this introduces new processing steps and fractured workflows. Larger groups of companies can turn to their performance management vendors such as Oracle and SAP but although they have XBRL engines, at the time of writing they do not appear to cater for iXBRL capability.
Managed Tagging Services, leaving the problem to somebody else) may sound appealing but the experience of the US suggests that this is not the case. Early filers to the SEC (Securities and Exchange Commission) found themselves paying huge sums of money for external tagging services only to find a high incidence of error. Many it seems are now considering bringing the tagging back in-house.
Conversion software facilities, especially those that take input in the form of accounts formatted in Microsoft Word or Excel are proving a distinct possibility. One leading player is Corefiling which happens also to be a significant player in providing regulators with the applications they need to unravel XBRL based submissions. These combined competencies put them in a strong position.
Potentially over the next few months we will see new solutions come to market but if there are new suppliers in the frame they are keeping remarkably quiet. It is not the SME that is going to find this difficult but the mid-range companies upwards who are undecided about which way to turn and the lack of good solutions. The software industry has a lot of work to do between now and the end of the year if UK plc is to avoid a last minute dash.
