iXBRL: ready or not, here it comes

In a perfect world, by the time corporation tax online filing becomes
mandatory for submissions made after 31 March 2011, all affected businesses and
practices will be adequately prepared, all of the affected software and systems
will produce the necessary XML, XBRL and iXBRL outputs and HM Revenue &
Customs will have a reliable, scalable and bug-free system in place to receive
them. But we live in a deeply imperfect world, so the reality will probably be a
little less rosy. How much less, remains to be seen. Meanwhile, accountants are
exploring their options.

Nick Rawlins, director of finance with the Lincs FM Group of nine regional
radio stations, has given the possibilities some thought and decided on his
approach.

“I will be handing everything over to our auditors,” he says. Rawlins
currently produces his accounts using Microsoft Excel then PDFs them, and he has
no interest in using a tagging service or buying new software just to make his
accounts iXBRL compliant.

“The auditors already have accounts production software, so I will send them
a spreadsheet and they can import the necessary figures from it,” he explains.

In similar circumstances, other FDs and CFOs may choose the same approach,
but there are other options.

Some companies may outsource iXBRL tagging and some related processes to
accountancy firms or other specialists; some of those with financial reporting
systems will find they have built-in XBRL tagging and iXBRL output; some may
decide to use tools such as Seahorse from CoreFiling to tag their own accounts
in-house.

“It’s not a difficult process,’ says Robert Kugel, an analyst
with Ventana Research. “I think this could emerge as the best practice
approach.”

But it’s not something that appeals to Ray Backler. The sole practitioner
currently uses tax software, MS Excel and a PDF tool called Nuance to perform
tax calculations and produce client accounts. Although he isn’t over the moon
about changing the way he does things or “feeling forced” to buy new software,
he does want to automate the new compliance work he’ll need to do.

“I don’t want to get involved in doing the iXBRL tagging myself, so I’m
probably going to buy VT Final Accounts,” Backler says. “I’d much rather leave
the problems to the VTs of this world.”

Firms with a range of tax and accounts production systems already in place
also expect software developers to provide them with the tools they need to
manage iXBRL tagging.

“I think we will be looking to Digita to guide us in the right
direction,’ says Kevin Salter, one of six partners at Glover
Stanbury in Devon.

The firm already uses software for final accounts production, corporation tax
computations and the electronic filing of CT600s, and Salter is expecting it all
to be updated and iXBRL-compliant well in advance of the April 2011 deadline.

Software for iXBRL CT computations is already emerging, but currently, Forbes
Accounts is the only commercially available accounts production package that can
produce and submit iXBRL tagged final accounts.

Digita, Iris, Sage and VT Software are among the many planning their
deliveries for the last quarter of 2010. This inconveniently overlaps with the
self-assessment season and doesn’t give practitioners much time to test new
systems or modify procedures.

“There’s no excuse for the poor timing,” says an industry insider, who
describes the implications as “potentially serious”.

He recalls what happened to one (now defunct) software company when it failed
to make a similar milestone.

Back in the late 1990s, a leading provider of practice software tried to
simultaneously make the leap from DOS to Windows and introduce a self-assessment
upgrade. And when it failed to get its personal tax product out on time, users
were forced to go elsewhere.

“I can see a similar scenario possibly brewing in the next few months,” he
warns.

So, some accountants might want to ditch their rose tinted spectacles in
favour of a fallback plan – just in case.

HM Revenue & Customs is providing guidance on the transition to
Corporation Tax online filing from 1 April 2011 at
hmrc.gov.uk/ct/ct-online/file-return/switching.htm.
It is also updating its guide to commercial software suppliers, to show products
that can produce one or more elements of the necessary tax return, available at
hmrc.gov.uk/efiling/ctsoft_dev.htm

What is iXBRL?

The eXtensible Business Reporting Language (XBRL) uses tags (like bar codes)
to make it easier for computer software to automatically communicate, exchange,
read, process and analyse financial information (as data). But XBRL-tagged files
cannot easily be used to reproduce a financial source document in its original
format, so HM Revenue & Customs has developed a version of XBRL that can.

Inline XBRL (iXBRL) combines HTML (a text-based language designed to display
data) and XBRL tags. This results in iXBRL files that can be opened (using a web
browser) so that people can easily see the original content and format of a
document, and computer software can also get the information it needs by
stripping out the necessary XBRL data from the file for automatic processing.

Beyond compliance

Corporation Tax online filing may be forcing XBRL on many accountants, but
HMRC and software suppliers don’t have to be the only ones to benefit from the
compliance effort. “There is no escaping the fact that there may be pain during
the first year, for the smallest to the largest organisation,” says Dr Paul
Booth, technical and development manager at the ICAEW IT Faculty. “There will be
less pain in subsequent years, when there will be opportunities for business
gains.”

With the support of XBRL, manual and complex processes can be redesigned more
efficiently – particularly in bigger businesses and practices. As XBRL also
makes the publishing, use, re-use, and exchange of finance-related information
more efficient, searches and analyses of information – that would otherwise take
hours to manually extract, compile, sort, summarise and filter – can take a
fraction of a second. So it can also benefit stakeholders inside and outside
organisations of all shapes and sizes.

What do you need?

To comply with mandatory Corporation Tax online filing accountants will need
the support of specialist software and services, including:

* HMRC template-based e-filing tool for submitting short form CT600;

* Corporation Tax computation software;

* Commercial or customised final accounts production software;

* Software to take Microsoft Excel and Word documents and tag them to create
the iXBRL output required by HMRC;

* Financial reporting tools offering built-in XBRL tagging and iXBRL output;

* Ready- tagged, template-based workbooks, for accounts to be transferred
into;

* Providers offering outsourced XBRL tagging services;

* Providers offering XBRL consulting and other specialist support services.

Source: ICAEW and KPMG.

What does HMRC want?

The pack containing Corporation Tax online submissions will need to comprise:

* Corporate Tax Return forms (Forms CT600) in XML

* Corporation Tax computation in iXBRL

* Legal entity accounts (UK GAAP or IFRS) in iXBRL

* Other supporting schedules in PDF

Source: ICAEW and KPMG.