Fears grow over HMRC’s CT Online deadline

Concerned AccountingWEB.co.uk members and tax/practice software developers have been wrestling with the implications of HMRC’s plans to make electronic filing of Corporation Tax mandatory from April 2011. John Stokdyk delves into the debate.

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John Stokdyk's picture

Stop press - Companies House gets in on the act too

John Stokdyk | | Permalink

Just as I was completing work on this article last night, Companies House and HMRC sent out a joint statement explaining their plans for a unified online filing regime for accounting periods ending after 31 March 2010. As part of the agreement, Companies House will accept accounts in iXBRL format as well.

For the latest news, consult the coverage on our Tax page.
__________________________
John Stokdyk, Technology editor

HMRC getting carried away?

Anonymous | | Permalink

Schedule 18 Finance Act 1998 gives HMRC the power to require a company tax return, including accounts. But paragraph 11 of that Schedule says, in respect of companies required to prepare accounts under the Companies Act: "the power [of HMRC] to require the delivery of accounts as part of the return is limited to such accounts, containing such information and having annexed to them such documents, as are required to be prepared under that Act."

The joint statement says that Companies House will accept accounts in iXBRL, but there is no suggestion that the Companies Act is going to be amended to require them in that format, nor that para 11 is to be repealed. What gives HMRC the power to produce directions that purport to override the clear wording of primary legislation?

The Carter Report included an express statement (in paragraph 7.3 on page 27, and unfortunately it didn't make it to the executive summary) that "HMRC should not require online submission of company tax returns until XBRL has been implemented and has bedded down." HMRC's claim that they are implementing the recommendations of the Carter Report is disingenuous at best.

There is a statutory instrument, but...

Anonymous | | Permalink

There is a statutory instrument (I think it is still a draft) that mandates that corporation tax returns must be submitted in any version of XBRL as specified by HMRC (or words to that effect). There is no direct mention of iXBRL or the accounts for that matter. However, under tax law the term corporation tax returns includes attachments such as the annual accounts.

iXBRL is a bit of a misnoma. A better name would be HTMLx. An iXBRL file is an HTML file and can be viewed directly in a web browser just like other HTML files. Special software can strip out the XBRL tags that are hidden within it. A good lawyer could argue that such a file is not a version of XBRL but something completely different.

Imagine a book written in English where key facts are translated into Latin by way of footnote. You could not possibly describe that book as being written in a version of Latin, could you? So the statutory instrument may be wonky. Does anyone want to take on HMRC? If you did, they would probably just have another statutory instrument passed anyway.

HMRC's legal argument for requiring a detailed profit and loss account is similarly very weak, but nearly everyone includes one with their corporation tax return because that is what HMRC want.

CT filing

Anonymous | | Permalink

AccountingWEB.co.uk guest editor Nichola Ross Martin went even further, calling the measure “the maddest, most stupid thing that HMRC has ever contemplated” and supporting a campaign to lobby MPs against its introduction.

But not everyone is convinced by the dangers posed. “Perhaps we should all plan to embrace it,” commented Paul Johnston. “I see it as a opportunity to get new corporate clients.”

Euan MacLennan likened the XBRL “whingers” to King Canute trying to hold back the tide of technology. “The introduction of XBRL accounts will only affect those die-hard DIY accountants who insist on preparing accounts

using their own Excel templates... These people will probably save money and improve quality by investing in accounts production software, which will of course be XBRL-enabled.”

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Nichola's comments are representative of a section of accountants and indeed the broader community who just see change as a problem.  She is probably still bemoaning the loss of a '78 player and thinks that an iPod has been sent by the devil!

I'm with Euan and Paul.  We know this will happen, we know this will ultimately lead to a more efficient system.  Lets embrace it and make it work for us.

I don't see why the accountancy/tax industry as a whole should be held back by those who seem to have an inbuilt refusal for technology to play it's rightful part in what we do.  Automate those parts of your work that you can, reap the rewards and move on, even if that means and bit of time and effort (and, heaven forfend,) learning as you go.

daveforbes's picture

Ready to roll

daveforbes | | Permalink

For any one that is interested I put a little demo up about a year ago for creating both traditional xbrl and inline xbrl at www.forbes.co.uk/xbrldemo.htm You can edit the example figures and go down to the bottom and choose to generate inline xbrl (or traditional xbrl with or without a spreadsheet). That was from a year ago and it is only a little demo, it does not do any checking and it runs pretty slow, and only tags up a subset of the figures - but go and hover your mouse over say the turnover and you will see the xbrl tag. Things have progessed in the last 12 months.

When the HMRC launch their service in November we will be launching :-

1. a version of our accounts package that produces inline xbrl
2. a version of our CT package that produces an ixbrl comp and attaches ixbrl accounts
3. a tool for taking any html document (produced from excel or word) and manually mark up as ixbrl
4. some example template excel spreadsheets (accounts and comps) that our CT package will convert to ixbrl
5. an outsourcing service for doing ixbrl conversion

Everything is currently on schedule !

David Forbes

p.s. Mr Stokdyk - you should go have a look at the little demo !

Phil Rees's picture

@ whoever made the fourth comment

Phil Rees | | Permalink

It is wrong to assume that we are all Luddites.

You seem to overlook the fact that the Revenue cannot cope with online filing at the moment; so to make it compulsory is taking the p.

We recently had an online filed CT return rejected. We reported this to Iris who asked for details of the rejection so we supplied this. They said it was a problem at the HMRC end. We wrote to HMRC detailing the rejection report. The reply, when it eventually arrived six weeks later, was risible - it asked us to telephone the so called "helpline" about it. We don't have time for such tomfoolery.

 

Resistance is futile... I am 'anonmous'

Anonymous | | Permalink

 Phil (like the profile picture by the way, seems appropriate)

There will always be a minority of cases whatever the weather as these systems are probably not faultless.  However, my comment was really of the nature that there seem to be so many people that appear to approach these things with resistance at the top of their agenda.

I may be doing you a disservice if I bracket you with those people, but, teething problems aside, I can only see the up side of moves such as this particular one by the Revenue.

Ultimately, the data we deal with is discreet in nature and anything that facilitates the automation of transmission of this data should be looked upon favourably.

I remember similar resistance to the use of computers themselves years ago, then things like email, scanned documents, electronic offices, online filing for personal self assessment etc.  Let's embrace it, make the best of it and not look for excuses why it won't work.

Ok?

Nick Graves's picture

Phil - That's just typical!

Nick Graves | | Permalink

Your tale is soooooooo typical, it's made me have a Basil Fawlty moment.

That is so usually HMRC's lackadaisacal response; lobbing the buck straight buck. They wouldn't understand the 'way forward' approach if you pushed them down a flight of stairs. Of course, if THEY require a response, it's by yesterday and it must be the response they want.

There are several circumstances where filing online will be rejected in XBRL (this even happens at Companies House) so there will need to be a lot of wrinkles fixing. But we know wrinkles almost never get fixed at HMRC. I have no problem with the application format per se.

Nichola's comments bemused me; I wouldn't have called this the maddest and stupidest thing they've done. Almost everything since and including IR35 has usually been both mad and stupid; in increasing measures, it's true. OK, superlative accepted, until their next pronouncement at least. 

 

 

 

 

 

We're ready - but HMRC won't be...

Anonymous | | Permalink

Resistance expressed here is not, I suggest, because any of us is against progress or new IT systems. It’s that we have the evidence from HMRC’s track-record that (a) implementation will almost certainly end up being postponed, (b) the number of bugs will be way beyond HMRC’s resources or brain-power to fix in a timely manner, (c) the consequent imposition of penalties on our clients will take ages to get withdrawn.

Evidence for these claims…? Tax Credits (years on, HMRC is still pretending TC’s non-availability on-line is “temporary”); PAYE (endless issues, resulting in wrong penalties, and even wrong tax-years on submission pages); CIS (postponed for a year, and today valid submissions are often still not accepted); R40 (why no on-line facility – especially when HMRC refuse to issue UTRs to “simple affairs” clients?)

I could go on - but a quick look at HMRC’s own “Service Issues” pages sums it up perfectly.

Move to iXBRL by all means – but don’t make it mandatory until fully tested and proven.

daveforbes's picture

Re: we're ready but HMRC won't be

daveforbes | | Permalink

The beauty of iXBRL from the HMRC point of view is there is very little, if any, work for them to do. All the work in terms of software development is on the shoulders of the iXBRL producer -  accounts and CT software developers. The place holders in the online submission format for receiving a pdf or xml attachments have been there since 2000. From a transmission point of view iXBRL is actually less complex than for a pdf (which being a binary file does not really fit in with the whole electronic filing set up). In order to view the iXBRL the HMRC just need a web browser such as internet explorer. So to summarise, tranmitting it, doing somthing with it as the other end are essentially trivial compared to writing the software to produce the thing in the first place.

 

 

Online Tax Return

Anonymous | | Permalink

I am a small business and so far do not have a business computer. So long as the Government is happy to supply the computer I will be happy to comply.

 

Fred Hoad's picture

No Computer?

Fred Hoad | | Permalink

That shouldn't be a problem. Someone as talented as yourself who can post on an internet forum, despite the otherwise handicap of not having a computer, should have no problem using their head as a wi-fi beacon and transmitting figures to HMRC just by standing outside one of their offices. 

You truly are a person of the future!

Online filing rejections

charles.underwood | | Permalink

Has anyone ever had a substantive response to an email or letter to the Online Services Helpdesk?

Their standard reply is to ask you to telephone because your email or letter did not provide enough information.  They do not want screenprints or error messages, they just want to speak to you so they can say that the problem is being escalated to their technical department.

Electronic payment

Anonymous | | Permalink

Ffiling CT600's online is relatively straightforward, using proprietory software or HMRC's, because we can do this on behalf of clients if they do not have internet access.  However, I was under the impression that payment of CT will also have to be made electronically.  This is frankly ludicrous.  We cannot do this on behalf of our clients.  Also it gives rise to the bizarre possibility of trying to pay a liaibility to HMRC (by cheque?) and having it rejected because it is not being paid electronically!  What are then going to do - impose a fine (and insist it is paid electronically)?

Companies filing their own returns?

Anonymous | | Permalink

I am involved with a couple of small companies (as director / director's husband) with simple tax affairs; these companies currently deal directly with HMRC and file all returns and computations themselves.  There must surely be many small companies with tax-savvy directors / employees in the same boat, but I have not seen any discussion of their position.

Obviously not economic to invest in CT software, so will we be able to upload figures directly to HMRC? If so, will this essentially require us to input accounts figures etc into HMRC forms (similar to Companies House online filing of abbreviated accounts)?

 

John Stokdyk's picture

Re: Companies filing their own returns

John Stokdyk | | Permalink

Anonymous - you have accurately described the situation that would apply for practitioners with a small CT workload (or individual companies that file returns themselves). Companies House already accepts XBRL from the PDF forms you describe, and work is in hand to enable a single submission to cater for both statutory accounts and tax purposes.

But think of the workload, accuracy and data management ramifications if you do more than a couple of companies' CT returns and rely on cutting and pasting figures from your final accounts and tax preparation tools (whatever they might be) into an online form? That's akin to the online supermarkets writing down online orders on a manual shopping list for staff to pick from the store or warehouse - it requires rework, introduces errors and undermines all the advantages of automation.

I have only heard back from a couple of software houses about their CT plans (including Forbes Computer Systems, above) but some of the smaller outfits are pondering whether it's worth their while to develop online CT filing tools if their users are all going to use the free HMRC tool instead. CCH, Sage, IRIS and Digita will cope, but the way the department has approached this project could trigger more consolidation within the tax software market.
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John Stokdyk, Technology editor

iXBRL could still be made easier, even at this late stage

vtsoftware | | Permalink

I have been looking at iXBRL (from the perspective of filing the annual accounts with HMRC) in considerable detail over the last month or so, and have reached the following conclusions:

From HMRC’s point of view, iXBRL is extremely clever because they have very little to do! XBRL International maintain and update the XBRL standard. XBRL UK devise and maintain the UK taxonomies. HMRC just have to receive an iXBRL accounts file that they can view in a standard web browser. If they want (and no doubt they have), they can write software to scan key items. That is not difficult.

On the other hand, a large number of companies will have to go to considerable effort to prepare a potentially vast array of data in the most complicated accounts format known to man. In all probability, most of that data will never be used.

HMRC could alleviate the difficulties a little by:

  • Making the minimum tagging requirement (a cut down version of the full 4,000 or so items) a permanent simplification, and further reducing the number of tags
  • Phasing in when iXBRL accounts become mandatory. Large companies first in April 2011, medium sized companies a year later and small companies a year after that

Philip Hodgson
VT Software

 

 

daveforbes's picture

Phasing in XBRL

daveforbes | | Permalink

There is a certain amount of phasing in already - it is not mandatory until 2011, full tagging is not required until 2013, though some vendors may decide to do this form day one. We certainly have gone down this route because I think it is actually easier to map the entire chart of accounts to the taxonomy rather than deciding whether or not each one is in the minimum tagging subset - and we don't want to go through this all again in 2012. It also makes testing much quicker as untagged data can easily be spotted. For this whole thing to be of most use to the HMRC (and possibly other consumers) in the long run I would have thought having a tagged detailed P&L is quite important.

As for phasing in by company size, I think the big PLCs are arguing that it should not apply to them initially as their accounts are so much more complex !

David Forbes

 

 

 

 

 

Phasing in iXBRL

vtsoftware | | Permalink

David. My suggestions were a little more Machiavellian. Yes, iXBRL is considerably more difficult for large companies. If it fails for them then surely it should be abandoned for all?