Bringing XBRL tax filing to the UK

Jeff Smith,

Customer Contact, Online Services,

17th May 2006

Agenda

• Why XBRL?

• External review of HMRC Online Services.

• The Company Tax Return.

• XBRL progress to date.

• Next steps.

• Lessons learned.

17th May 2006

Why XBRL?

• HMRC first became aware of XBRL in 2001.

– What attracted us:

1 vision of streamlining the end to end financial reporting

process - linking business, accounting and tax software.

2 access to data - rather than everything on paper.

3 picking up an external initiative - origins within the

financial community, not Government driven.

4 possible data standard in a wider government context.

17th May 2006

External review of HMRC online services

• July 2005 - UK Government

asked Lord Carter to advise on

measures to increase the use of

HMRC’s key online services, in

order to ensure sustainable and

efficient service delivery for

taxpayers, while continuing to

support compliance.

• March 2006 - UK Government

accepts recommendations in full.

17th May 2006

Key recommendations (for XBRL):

• “All companies should be required to file their company tax returns

online, using XBRL …….. for returns due after 31 March 2010.”

• “Our view is that HMRC should not require online submission of

company tax returns until XBRL has been implemented and has

bedded down.”

• “We also recommend that they [HMRC & Companies House] should

work towards providing a joint filing facility so that companies and

their agents only have to submit the same information once.”

17th May 2006

Company Tax Return- scope for a simpler

approach

1 Return form (CT600)

2 Accounts

3 Computations

• Need ALL three components

to make up a valid return

• Complex information

• Difficult to put together

CT600 Form

Statutory Accounts

Computation

CT600 Form

Statutory Accounts

Computation

17th May 2006

Computations are complex• Accounts figure of profit

adjusted for tax purposes– capital allowances

– depreciation etc

• Often 30 pages +

• Free format

• No standard layout

• Paper documents– usually produced using specialised software

– information inaccessible

– no data flow to HMRC systems

17th May 2006

Accounts are currently paper based

• We require full accounts including

Profit & Loss

• Again all held on paper with little

data flow to HMRC systems

• Limited information available for risk

assessment and for Government

financial planning

• Companies required to submit

accounts separately to other

Government Departments

17th May 2006

XBRL e-filing progress

• Late 2001 - Workshops with accountants and software vendors agreed

a phased approach to CT e-filing with XBRL seen as an integral part

from the outset.

• Phase 1 - delivered in March 2003

– XML based CT600 Return + computations + accounts (as pdf’s).

– enabled proving of the basic service before moving on to Phase 2.

• Phase 2 - delivered in February 2006

– allows computations to be submitted in XBRL format– HMRC have developed the underlying data structure in conjunction with

accountants and software vendors. Complex task as there is no standard format for computations and need to avoid any constraints in how information is presented on screen or when printed.

17th May 2006

Next steps - XBRL accounts

• Will be able to accept XBRL accounts as soon as suitable accounts

taxonomies are available:

– UK Companies House (small, audit exempt companies later in 2006 and full

accounts in 2007)

– UK GAAP (HMRC are assisting with development)

– IFRS, US GAAP etc

• Straightforward task for HMRC to link to new taxonomies.

• HMRC XBRL service designed to interact with third party software

systems only

– HMRC’s own online application does not include an XBRL

capability (although could be made to do so if customers need it).

17th May 2006

Next steps - working towards mandatory XBRL e-filing in 2010• Technical specification is already published.

– work closely with software vendors and accountants to help them adopt XBRL (main task is mapping our taxonomy to their products).

– encourage accountants to start XBRL filing early - working collaboratively to prove and fine-tune the service, especially for the more complex cases (e.g. use of taxonomy extensions).

• Widening the net.

– joint workshops with software vendors on online services?

– how do we reach the smaller accountancy firms? May not be represented by professional bodies.

– software availability for very small companies?

17th May 2006

Lessons learned

• CT Computation - Taxonomy development - 4000+ items

– Large scale data analysis exercise - requires an iterative approach.

– lack of any existing structure (free-format) main reason for complexity

– but feasible with assistance from accountants and software vendors.

– started with Excel, but soon required specialist XBRL support and benefited

from XBRL software tools (ensuring conformant to standards and internal

consistency and validation).

– Try to keep it simple!

– taxonomy itself and XBRL features

– e.g. limited use of computational and formula linkbases.

17th May 2006

Lessons learned

• Display (rendering) of XBRL submissions (on screen and printed) is a key business requirement, both for HMRC, accountants and company directors.

– clients need to approve what is to be submitted - a string of data is not enough!

– stylesheets have proved to be very difficult to create, even for simple accounts

and computation - now an XBRL Domain Working Group issue.

– US Securities & Exchange Commission share our concerns about rendering.

17th May 2006

Lessons learned

• Consider use of software tools for both taxonomy creation AND

review when external organisations join in.

17th May 2006

Lessons learned

• Provide comprehensive documentation

17th May 2006

The End!

Bringing XBRL tax filing to the UK