The introduction date for the requirement to file corporation tax returns in iXBRL format is not going to be deferred, even though many software providers will not be ready. Our specialist iXBRL services are already up and running and we are ready to help clients from Day 1, which is somewhat appropriately 1 April 2011.
You may have seen the recent high profile lobby from all of the pre-eminent accounting bodies for HMRC to defer the compulsory on-line filing of corporation tax returns and supporting financial statements in iXBRL format. You may also be unsurprised that these representations, whilst politely acknowledged by HMRC and the Treasury, were quickly met with a straightforward "no". Most tax professionals and businesses have little issue with the principle of filing tax returns on-line. Many have been doing this for a long time and tax reporting software such as our own has delivered this part of the mandate, together with the iXBRL requirement, for some time.
The key challenge of the 1 April 2011 mandate has always been the preparation or conversion of financial statements in iXBRL format. Software and services to facilitate this are less well evolved and even recently there have been delays reported by high profile software vendors in having their accounts preparation platforms fully iXBRL enabled. Even in the second decade of the second millennium, a very high proportion of financial statements are prepared in Microsoft Word. Whilst this lends flexibility in providing ‘visual elegance’ to the accounts, unstructured data does not lend itself well to automated iXBRL tagging, even against the minimum taxonomy provided by the two year soft landing period.
We have always been mindful that the 1 April 2011 mandate was unlikely to slip and that businesses would need to be geared up to meet it, not just by demonstrating best efforts during the transitional period. We also believe it is important that advisory thinking and input is given to the iXBRL engagement rather than treating it as a mechanistic exercise required purely to meet a statutory obligation. That’s where CoreFiling's software excels. CoreFiling provide processing and validation software to HMRC and are generally regarded as world leaders in iXBRL tools.
We are also aware that iXBRL services initially need to cover all formats of financial statements, UK GAAP and IFRS, and accounts production software selection, which is seen as a longer term imperative by many. Producing financial statements in Word and converting them to another format to send to HMRC and Companies House cannot be a sensible longer term business process, particularly for the many sets of financial statements that are only prepared for the purpose of filing with these bodies.
Turning to the soft-landing period, now formally re-branded as ‘transitional guidance’. HMRC have re-affirmed that there is no penalty framework for deficient tagging unless fraudulent or leading to tax loss - late filing penalties, off course, still apply. So provided you’ve made demonstrable efforts to tag (particularly) your financial statements, any genuine errors should go unpunished. But this doesn't reconcile easily with the best practice that most will rightly be seeking, and will do nothing to satisfy those with tax policies that emphasise ‘right first time’ as a priority in all of their dealings with HMRC. Post transition in 2013 will be a different story with the added burden of tagging against full rather than abridged taxonomies.
Companies House are also expected to mandate iXBRL filing in 2013 and it will be important that the formatting requirements of any joint filing initiative are common. For example, HMRC just need the iXBRL data and are not fussed about how hard copy might look. This may conflict with anyone requesting financial statements via the Companies House Register – these would need to mirror the native format. Our iXBRL services maintain the underlying document format and we will be contributing to the forthcoming debate to help simplify matters generally and eliminate divergence between HMRC and Companies House requirements.
Where do we think this is likely to lead over the next five years? iXBRL will ultimately become the global standard for exchanging financial information and we feel that HMRC will not be the only party wanting to utilise the rich store of data being amassed. Our intention is to be able to help our clients mine their own accounting data to tax return trends, group and competitor analyses and other management information that is currently very difficult with unstructured data formats.
If you would like further information about our iXBRL services, please speak to your client service team or contact firstname.lastname@example.org.
You can read more about our iXBRL services here.