For close to a decade, financial reporting technology nerds have been investing a lot of time and intellectual activity in XBRL, the eXtensible business reporting language. After years of indifference from accountants, XBRL leapt to the top of the UK profession’s agenda when HMRC set 1 April 2011 as the date from which companies will have to file their Corporation Tax computations and supporting accounts electronically using the data exchange standard.
If you are not fully up to speed with iXBRL, you now have just over a year to get your processes and systems ready for the switch. This article sets out some background information about XBRL and iXBRL and presents a range of scenarios to help you plan your preparations.
Countdown to iXBRL
Now - HMRC CT Online software with CT600s with iXBRL accounts & computations capability available.
Mar-Sept 2010 - Some software packages recognised by HMRC for online filing. More products will follow.
1 Apr 2010 – CT returns relating to financial years ending after this date should be filed with accompanying accounts and computations in iXBRL, but you can buy extra time by filing accounts early before the 31 March 2011 deadline.
Summer 2010 - Companies House plans to open voluntary iXBRL filing mechanism for abbreviated accounts.
31 Mar 2011 – Final date for which non-electronic CT600s and PDF computations & accounts will be accepted.
Summer 2011 - voluntary iXBRL extended to all accounts.
What is XBRL & how does it affect you?
XBRL was originally devised as a means to transfer accounts and financial data between electronic systems. Based on XML (eXtensible Mark-up Language), XBRL is similar to the HTML tags that is used to define web page layouts. Rather than defining formatting options such as <title> or <font> , XBRL tags have been extended to cover common financial data elements such as <ifrs-gpAssetsHeldSale> and <ifrs-gp:CurrentTaxReceivables>.
XBRL has been around for more than a decade and was initially championed by financial analysts, who saw it as a means to automate the collection and comparison of data on company performance. This use of “interactive data” has been embraced by the US Securities and Exchange Commission, which now requires companies listed on the exchanges it regulates to file their quarterly and annual accounts using XBRL.
While conceptually simple, XBRL is complicated by the variety of data elements that can appear in financial statements, with separate data maps (or taxonomies) catering for different financial reporting regimes and company types. By way of example, the full UK IFRS taxonomy includes 3,725 separate tags; UK GAAP has 5,292. Specialist taxonomies exist for banking, extractive industry and work is underway on equivalent data dictionaries for charities and other entities.
When HMRC jumped aboard the XBRL bandwagon, its Corporation Tax taxonomy required 4,561 XBRL tags. It also ran into the thorny problem of presentation. Company law requires accountants to submit an exact copy to Companies House of the financial statements they prepared. There is no way a page of raw XML data tags could reflect the formatting and layout of those statements.
The mechanics of iXBRL CT computations and accounts
HMRC’s solution to this problem is iXBRL, a hybrid that combines the XBRL data tags with HTML formatting that make it possible to view an accurate reproduction of the accounts in a web browser. Making the format mandatory for CT accounts/computations and setting 2011 as the deadline provoked outrage from the profession and a few pained whimpers from the tax software industry, but there is no turning back.
What will be expected from companies that pay Corporation Tax from 31 March next year will be an annual CT600 return filed online, accompanied by supporting computations and accounts in the mandated iXBRL format. There are still some grey areas around what to do with additional information – the sort of explanations contained in the personal tax return’s “white space” boxes – and the current advice is to continue submitting this as PDF files, and then chase your HMRC contacts to ensure they make a note of it.
If you’d like to be a pioneer, HMRC’s CT Online portal is open for business now to accept your submissions via a PDF form that, like the Companies House mechanism for abbreviated accounts, will convert the information into iXBRL for you. The mechanism is a one-shot data entry process, based around the current Short Company Tax Return. It will accommodate most types of trading loss, but will not be suitable for companies with more complex tax affairs, nor is it recommended for those who prepare returns for multiple companies. These cases would be better handled by a commercial CT application; five systems have already passed HMRC’s submission testing and more are on their way.