With attention on XBRL firmly focused on developments with the SEC concerns are growing that most finance directors in the UK are blissfully unaware that from 2011 they will be required to submit tax returns and accounts using the XBRL mark up language. Gary Simon, FSN’s managing editor reports.
As from 1 April 2011, for any accounting period ending after 31 March 2010, companies must file their Company Tax Return (including supporting documentation) online, but the accompanying accounts must be filed in XBRL (Extensible Business Reporting Language). For example, a company with a 30th June 2010 year end must file its accounts and CT Return with HMRC in an XBRL format by 30 June 2011.
According to Bivek Sharma, Partner, Compliance and Technology at KPMG, “The majority of companies are completely unaware of this ‘ticking time-bomb’. The problem isn’t the filing of CT Returns because tax software vendors are already working hard to ensure that tax numbers can be filed in an XBRL format but the filing of company accounts is a different matter.”
Sharma told FSN, “Almost all large and medium sized companies manually produce their accounts using MS Word, Excel or similar applications. To comply with this deadline, companies will need to reengineer their in-house accounting processes and implement systems capable of producing company accounts in XBRL format.”
According to KPMG, HMRC have stated that if organisations are unable to file both CT returns and company accounts in the prescribed format then HMRC will simply reject the submission.
But companies this side of the Atlantic will be unable to take advantage of the extensive work being carried out in the United States as companies prepare to file quarterly or annual 10Q’s and 10K’s.
After several years of “will they?”/”won’t they?” the Securities and Exchange Commission in the United States has pressed the green light on ‘interactive reporting’ using the XBRL standard. Around 500 of the largest companies who file using U.S. GAAP with a public float above $5 billion will be required to provide interactive data reports starting with their first quarterly report for fiscal periods ending on or after June 15 this year. Other companies will be phased in over the next two years.
Sharma told FSN, “In the US the XBRL filings are simply that, i.e the submission of machine readable code, as if you were pressing the ‘view source’ in your internet browser. The big difference here is that HMRC are asking for in-line accounts – that is accounts normally presented so that they can be read by a human but with the ability to view the supporting XBRL underneath, rather like electronic skins.”
For the moment, says Sharma, most of the popular accounting packages do not support HMRC’s preferred format.
It is a concern shared by David Taylor of Trintech and a Member of the FEI CFIT Committee (Committee for Finance and Information Technology). Talking to FSN, Taylor said, “We have recently observed that there has been very little concise coverage of the imminent needs to be compliant with HMRC for XBRL on Corporation Tax, as well as developments for Companies House Statutory reports. We think that this is a ticking time-bomb with very few UK businesses familiar with XBRL or the requirements to file in-line accounts. It’s a requirement that is going to affect all multinational companies with a subsidiary in the UK.”
“The Corporation Tax side of things is probably being handled by tax packages but the accounts requirement is another matter. I’m not aware that any of the popular packages can cope with it,” added Taylor.
It is a hole that KPMG hopes to exploit. In the short term KPMG is offering an XBRL Mapping Engine [XME] which allows prepared statutory accounts to be converted into XBRL. In the longer term the firm expects that there will be automated preparation of statutory accounts, including XBRL tagging.
“Our XME tool allows manually developed accounts in Excel to be imported, tagged and mapped using the appropriate XBRL taxonomy,” added KPMG’s Sharma.
Sage, one of the UK’s leaders in mid-market accounts packages is currently working on the new rules, focussing initially on professional accountants. Stuart Lynn, Head of Research and Development for Sage mid-market told FSN, “We are working on a consortium with HMRC and Grant Thornton, examining the production of XBRL from our Accounts production packages.”
“We have been working with electronic filings for some time and for example support e-filings from Payroll and similarly VAT e-filings from our mid range products such as Sage 50,” he added, suggesting that Sage will take any changes in its stride.
However, whether accounts filings will be able to be shared with Companies House, saving companies the burden of multiple submissions remains a mute point. By 2011 it is expected that companies and their Agents will be able to file Company Accounts and Company Tax Returns jointly if they wish to, making one submission to cover both. This will offer a reduction in the compliance costs associated with providing overlapping information to two government departments.
HMRC says they will still require, as now, full statutory accounts to be submitted as part of the Company Tax Return. The accounts the company submits to Companies House may still be full or abbreviated (if this is permitted under the Companies Act). The intention is that this will be possible as a single submission, with each department only able to access the data that it gets now. HMRC adds that there are no plans to change either the statutory filing deadlines for accounts to be submitted to Companies House or for Company Tax Returns to be filed with HMRC.
