AS ADVISERS PREPARE for a new way of filing clients’ returns, the profession has been warned of the hidden costs of implementing new software using the computer language iXBRL.
Experts are concerned that advisers have failed to take into account the full cost of the new software, upgrading existing IT systems, and the extra manual work needed that could see implementation expenses rocket.
The technology is designed to allow financial information to be “tagged” with digital markers and filed online in a standardised format for easier comparison.
In theory the system should automatically highlight key information. However, in reality experts’ claim a fifth of the tagging is not automated and will need to be undertaken manually, increasing the workload and cost to the adviser.
From 1 April HM Revenue & Customs is requiring all corporation tax to be submitted online in a new technology format known as iXBRL (inline eXtensible Business Reporting Language).
ICAS assistant director of tax Donald Drysdale claims iXBRL places a heavy administrative burden on UK advisers. It has been introduced at a time when the profession is already focused on helping struggling businesses. Leaving advisers with the decision to pass on the costs to the businesses they are trying to help, or take on unchargeable work, is a conundrum that the profession could do without, he claims..
The manual tagging problem is focused on just a part of the tax submission, said Anita Monteith, ICAEW’s tax manager in the SME and online filing division. Corporation tax filing is split into two sections. One is tax computations, the other accounts. The accounts filing is where the problem lies. Many accounts now include narrative reporting, which cannot be easily matched-up for defined tags.
HMRC is taking a “soft landing” approach until April 2013. If advisers have submitted their corporation tax incorrectly or late they will not be penalised by HMRC if they can prove they took reasonable steps to avoid mistakes or delays.
Chas Roy-Chowdhury, ACCA’s head of tax, said: “Speak to HMRC before spending a lot of time on tagging. There may be a way for you to work around the issue and submit less tags during the soft landing.
“It takes a long time installing the hardware, software and doing a dry run, you don’t want to use up anymore unchargable time than necessary,” he said.
Technology companies claim they will develop the software to take on more of the manual work from filers, in the future.
However, Drysdale believes that even if advisers were to obtain software that was 100% automated, implementing iXBRL is still “not plain sailing”.
Many tax filers are unaware they may have to update their servers to work with iXBRL he warns. The new IT system may not be compatible with iXBRL. This could leave firms coughing up a substantial amount to upgrade their hardware.
“People are being forced to make big investment decisions quickly,” said Drysdale.
Accountants should look at their entire business when deciding whether to make such a big investment instead of focusing on one narrow areas of their IT he said.
Chas Roy-Chowdhury also recommends corporation tax should be submitted before the year-end to avoid last minute problems. He concedes this could be a “headache” for advisers and clients to schedule.
Although the deadline for introduction is 1 April, the majority of corporation tax is submitted towards the end of the calendar year. Tax filers may want to take on the “headache” by preparing early to bring company tax submissions into the new order.
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