iXBRL: all change already

Recent announcements from HMRC and Companies House may have undermined the approach taken by many businesses to comply with the introduction of compulsory filing of tax returns and accounts with HMRC in iXBRL.

Until last week, HMRC’s transitional phase, requiring a fraction of the full list of iXBRL tags to be applied, was expected to finish on 31 March 2013.

Companies House were expected to mandate iXBRL filing at the same time.

The key concerns over the full launch in 2013 were:

• compatibility of HMRC and Companies House iXBRL requirements;
• the magnitude of the full HMRC changes (a fivefold increase in some tagging requirements);
• significant changes in accounting standards being introduced at the same time; and
• building and maintaining the resource and expertise required to tag accurately.

Companies House has now deferred mandatory iXBRL filing until at least 2015.

HMRC have released a consultation document, Digital by Default, which proposes to accelerate the move to deliver its services online for all the main business taxes.

Within the consultation document is an acknowledgement that ‘there may be a case for extending the life of minimum tagging lists for accounts information beyond 2013’.

Given these postponements, businesses would be wise to look again at their year one iXBRL solution and make plans based on a full introduction in 2015.

At that time, once iXBRL has been fully introduced, it should then become more common to adopt iXBRL integrated accounts preparation software.

The market for it is not particularly mature at present and mainly favoured by businesses producing large numbers of similarly formatted accounts.

Two years of transition become (at least) four

For the period to 2015, the basic options are to tag in-house or to outsource. Filing success rates have been variable and we understand that, to date, a third of all filings have failed.

Key reasons for failure have been deficient tagging and problems with underlying tagging software. In summary, insufficient quality assurance has been carried out. 

HMRC’s guidance confirms that filings will not be rejected if they comply with 16 Joint Filing Common Validation Checks – items like company name/number, accounting period and balance sheet dates.

Nor will HMRC penalise missing or incorrect tagging, provided businesses can demonstrate best efforts in complying.

However, if you want to deliver returns that are right first time – be that in accordance with your tax policy, an agreement with HMRC, or simply that you adopt a best practice approach – HMRC’s guidance may provide a useful fallback position at best.

This is especially relevant given that HMRC have stated that they will not open CT enquiries solely or mainly to check the quality of iXBRL tagging, although deficient tagging will increase the potential for post-submission contact from HMRC.

Selecting the best software is important and structuring the format of your financial statements in a tabular template will generally help.

However, its also paramount to know the taxonomies inside out.

Free-format notes and disclosures are particularly difficult to tag, despite the automated tagging claims of many software vendors.

This can make it difficult to undertake tagging work in-house, especially for larger groups, given the resource requirements.

Tag: in-house or outsource?

Businesses now need to decide whether to bring tagging knowledge and capabilities in-house, continue with this approach, or to choose an outsourcer who provides a quality product at a competitive price.

The following table is designed to help choose between approaches, given that the total costs of carrying out tagging work in-house, or outsourcing to a third party who will also quality assure the tagging, are often similar.

What’s the current state of play in the market - and what should I do now?

Quite rightly, many businesses remain reluctant to redesign longstanding internal accounts production processes until iXBRL has been mandated by Companies House and HMRC and transitional arrangements have ended, when the tagging requirements are unlikely to undergo further significant changes.

They are choosing to outsource the tagging of their financial statements to iXBRL specialists to mitigate the risks, particularly through 1 April 2013 when HMRC tagging against full taxonomies is expected to be mandated.

Following the announcement by Companies House, outsourcing programmes are more likely to continue until at least 2015.

The outsourcing market is still evolving, but the emerging best practice is to outsource to a professional services firm that provides reassurance on quality such that minimal additional checking is required by in house teams. All outsourcers should be prepared to share their failure rate with clients.

Best practice is to interrogate tagged accounts with HMRC’s validation checks as a final step to ensure a 100% success rate.

Those who have chosen to tag in-house may now want to reconsider whether this is a sustainable option for the next four years.

Those who have experienced poor quality tagging from those competing purely on price should consider changing for year two.

iXBRL remains a headache, but the current, less onerous, requirements now seem likely to be with us for several years.

The promised business benefits seem as far away from crystallising as ever, unless iXBRL is fully embraced as the internal reporting language.

This remains as rare as iXBRL was itself, before HMRC mandated it. 

Tony Spillett, Tax Partner and head of client iXBRL services, BDO

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