By Simon Witkiss, Product Director at IRIS Software
The arrival of iXBRL mandation in April 2011 represented one of the greatest compliance challenges for finance professionals. With very few exceptions, all companies and organisations that are liable for Corporation Tax must file an online Company Tax Return, with the computation and accounts attachments in the specified iXBRL (in line eXtensible Business Reporting Language) data standard.
The rationale was to help HMRC to tighten its monitoring of the financial affairs of the UK corporate world. iXBRL makes it easier for HMRC to uncover anomalies in financial reports, identify cases outside expected norms and target non-compliant businesses for further scrutiny.
Overtime, the data accumulated from iXBRL submissions will provide a powerful resource for HMRC investigations into a company’s current and historical tax affairs.
No softening on iXBRL soft landing removal
To smooth the way to the new reporting regime, HMRC granted a two-year transitional period, also known as the ‘soft landing’. This gave accountants and vendors of accountancy software time to prepare for the changes.
HMRC recently announced that it will not be moving from its Minimum Tagging List in favour of full tagging, as was originally expected to happen. However, there has been no changeon the soft landing. It will terminate, as always planned, at the end of March 2013 on the expiry of the transitional period. HMRC also plans to make limited changes from autumn 2013, including a requirement for detailed profit and loss account tags.
Provide greater transparency…or face greater scrutiny
HMRC is expected to use exception-based reporting to focus on companies that have ratios well outside the norms for their peer group. There is also likely to becloser scrutiny of the quality of the tagging when the soft landing is removed.
It seems probable that HMRC’s risk assessment procedures will actively seek out anomalies that may lead to further investigation. Here is HMRC’s own view on the subject, in a statement issued in May 2012: "More information with XBRL tags helps HMRC’s risk assessment, reducing the demands it needs to make on the majority of companies in assuring compliance with tax obligations."
Certainly, if a practice or corporate finance department takes the opportunity to be as transparent and accurate as possible in its use of iXBRL, this will help to demonstrate that robust processes are in place.
Conversely, failure to make the grade on iXBRL could, therefore, attract undue attention and spark an investigation by HMRC.
The expanding compliance overhead
iXBRL is just one compliance challenge for the UK accountancy profession, albeit a critical one. The introduction of Real Time Information, being introduced at the same time as the soft landing removal, will affect any practice, firm or company with a payroll to manage.
Accountants have all this to contend with, in addition to the usual January peak busy season. UK adoption of IFRS for smaller businesses is also on the horizon as a major legislative change.
At IRIS Software Group, we recognise that the growing burden of compliance makes it more important than ever that the accountancy software on which businesses and practices depend keeps ahead of the legislation. We were prompt in responding to HMRC requirements on iXBRL tagging,with software that was iXBRL-ready far ahead of the mandation deadline. In April 2012, we delivered enhanced ‘second generation iXBRL software’, with more intuitive iXBRL tagging and the ability to submit iXBRL tagged accounts to Companies House (as well as to HMRC).
As well as our iXBRL accounts product and tax software, our range of iXBRL solutions also includes an online tagging tool that intelligently tags numeric data and free text, and an iXBRL outsourcing service.It’s worth noting that our iXBRL-compliant software has enabled IRIS customers to file over two million iXBRL compliant documents to HMRC – 2,171,640 at the last count, to be precise. That is more than any other software vendor on the market.