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Fears grow over HMRC’s CT Online deadline

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1st Sep 2009
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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.

As part of the Carter programme to increase efiling, Corporation Tax returns will have to be filed online from 1 April 2011, relating to periods ending on 1 April 2010, which means the current period for many companies. The new rules will not apply to amendments of earlier returns.

Following recent publicity from the department, and the publication of draft legislation to allow it to mandate the delivery of computations as inline XBRL (iXBRL) files, are filed, the topic has become a regular Any Answers fixture.

“How I will be able to convert my excel files to XBRL format?” asked Tony Lecart, on 20 August, echoing a similar query the day before by Julie Severn

This article summarises the available information on what companies and their agents will need to do, and covers some of the potential problems that have been highlighted by AccountingWEB.co.uk members.

What exactly will be required?

HMRC’s directions for how the system will work explain that once you have registered for CT Online you will then file forms CT600A, CT600C and CT600J, plus accounts and computations, electronically in what is known as inline XBRL (iXBRL) format; PDF will be accepted for any supporting documents. Returns can be generated using third party software or HMRC’s own free filing mechanism, which will convert the accounts data and computations entered into XBRL. The should be available this autumn.

HMRC’s tool will pre-empt those from commercial suppliers, many of whom are having to take on extra work to adapt their products to HMRC’s variant of the international data exchange standard. The department advises that companies will need to check whether their CT software will be able to support online filing and maintains a list of products that have passed its tests (NB - currently listed products are not yet tested for their iXBRL capabilities).

What is iXBRL and how will the system work?

In conceptual terms, XBRL lives up to its billing as an XML-based business reporting language. XML is an extension of the web’s mark-up language and applies extra formatting tags to data to describe what it is and how it should be displayed.

Tax software developer David Forbes of Forbes Computer Systems explained that while a PDF tax form showing turnover in Box 1 would need a human to look at the figure, XBRL makes it possible to extract the number automatically.

Confessing himself “not to be a massive fan” of XBRL, Forbes’ company was the first to file a set of abbreviated accounts at Companies House using the format in 2005. The main vehicle for XBRL is likely to be accounts production packages, and the task for tax software houses is to take the data from the company’s final accounts and reformat and recalculate it to match HMRC’s CT definitions. These will be set out in a taxonomy detailing the data tags.

Forbes explained that XBRL could be produced using a spreadsheet set up in such a way that the cells containing the relevant data would be tagged with the XBRL reference, or linked to look-ups that assigned the correct labels. Mapping data to a separate look-up table makes it easier to deal with subsequent changes in the underlying schema.

But HMRC’s approach to XBRL does not rely on style sheets to render the information in a form that can be more easily understood by humans. Ben Bishop, the head of R&D at Sage’s Accountants Division said this variation from the international norm stemmed from the conflict between HMRC’s desire to receive accounts data in a standard format with accountants' need to ensure accounts appeared exactly as they created them. Style sheets would remove any formatting flexibility, so Sage opted to support HMRC’s “inline” approach, Bishop said.

What will this mean for agents and their clients?

Sage and Forbes are among the early movers within the software industry. Forbes claims to have an iXBRL CT product ready to roll, and Sage says it is on track too, although it faces the additional complexity of linking its tax application to accounts production programs.

Most tax and practice software houses are hard at work on iXBRL-compliant products, but contributors to the debate on AccountingWEB.co.uk have asked what will happen to practitioners who use Word or Excel to produce final accounts, or whose clients do that work.

Michael Bell predicted the XBRL workload would fall on agents’ shoulders - most client companies already pay their agents to submit CT returns, so they will assume their accountant has that under control as part of their existing service, he suggested.

“Totteridge” expected to rely on HMRC’s software and noted: “This will probably not be a vast amount of work, but it will inevitably leave me with the impression that the system has got worse rather than better, however technically more advanced it may be.”

The software view

BASDA, the business software trade body, has been actively lobbying HMRC to take into account the industry’s fears about the likely workload for both developers and users, but its pleas have been ignored.

Developers remained concerned about relying on a new technology and specifications that have not been publicly available for much time - undermining one of Lord Carter’s principles that systems should be adequately tested before going live. This raises the spectre of yet more system failures when the mandatory service goes into action, and BASDA circulated a summary of its position on the new CT filing regime by pointing out that while HMRC would benefit from the expected efficiencies, “the costs are effectively being placed upon the software industry, its clients (agents & accountants) and the end business customers”.

Arguments for and against

Feelings within the profession are also running high on this topic. An anonymous response to Tony Lecart’s question warned of “serious implementation problems and costs” for firms that didn’t use commercial software products,

In an early post, another member reported after attending an HMRC seminar that “HMRC are committed to this path despite the software and public practise community saying that it is far too ambitious.” Among several existing quirks, a company that posted a loss would not be able to file a short version of the CT600 (the minimum requirement), meaning it would need to find software to cope with the more complex version of the return. And when it comes to XBRL software, the member added, “I tried four [different XBRL parsers] and got four different representations of the same XBRL standard... Leading edge technology is NOT the place for HMRC manadatory software policies.

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.”

Which side of the Corporation Tax XBRL efiling fence are you on? Feel free to voice your thoughts by commenting below, and by voting in this week’s XBRL poll.
 

Replies (19)

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
02nd Sep 2009 10:02

Stop press - Companies House gets in on the act too

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

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By User deleted
02nd Sep 2009 13:48

HMRC getting carried away?
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.

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By User deleted
03rd Sep 2009 12:09

There is a statutory instrument, but...

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.

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By User deleted
03rd Sep 2009 13:05

CT filing

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.”

-------------------------------------------------------------------------------------------

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.

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By daveforbes
03rd Sep 2009 13:37

Ready to roll
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 !

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By Phil Rees
03rd Sep 2009 15:43

@ whoever made the fourth comment

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.

 

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By User deleted
03rd Sep 2009 15:55

Resistance is futile... I am 'anonmous'

 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?

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By Nick Graves
03rd Sep 2009 16:14

Phil - That's just typical!

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. 

 

 

 

 

 

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By User deleted
03rd Sep 2009 17:48

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

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By daveforbes
03rd Sep 2009 19:55

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

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.

 

 

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By User deleted
07th Sep 2009 10:47

Online Tax Return

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.

 

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By Fred Hoad
07th Sep 2009 12:25

No Computer?

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!

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By charles.underwood
07th Sep 2009 16:13

Online filing rejections

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.

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By User deleted
08th Sep 2009 17:08

Electronic payment

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)?

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By User deleted
08th Sep 2009 17:48

Companies filing their own returns?

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)?

 

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
08th Sep 2009 17:52

Re: Companies filing their own returns

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

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By vtsoftware
12th Oct 2009 11:20

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

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 tagsPhasing 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

 

 

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By daveforbes
02nd Dec 2009 00:45

Phasing in XBRL

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

 

 

 

 

 

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By vtsoftware
02nd Dec 2009 09:21

Phasing in iXBRL

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?

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