iXBRL ready

HMRC’s iXBRL DEADLINE is a week away. So if you’re not ready, panic now! But last week I was addressing those attending our Troubleshooting XBRL event and I asked for a show of hands: who had decided what approach they would be taking to preparing accounts in iXBRL format? Perhaps surprisingly, no more than 10% in the room had firmly decided how they were going to do it – let alone got as far as choosing software, or an outsourced tagging provider. I hasten to add that this was not a representative sample: those who have already got their approach to iXBRL sorted would not have felt the need to come to our event.

Still, that group seemed remarkably laid back. But there was an explanation: the deadline is not 1 April 2011 after all. Your deadline (for corporation tax filings to HMRC) is 12 months after your year-end, and – according to Companies House statistics – only 7% of companies have an April year-end. On top of that, many April (and May and June) filers will have heeded our advice to file before the end of March, under the old, pre-iXBRL regime, so I expect it will be rather less than 7% this year.

In reality there is a whole range of iXBRL deadlines, stretching from next month through to March 2012, and clustered toward the end of that period. December and March year-ends make up a disproportionate share of the total, so that 49% of businesses do not actually have to make a filing in iXBRL for at least another 9 months.

Far be it from me to indulge – still less encourage – complacency. After all, things always take longer than you think. Especially if they are IT projects. But if you are still several months, or even a year, away from your first iXBRL filing, it could make sense to wait a while and learn from the experience of others – and let them do the “beta testing” of software that has come to market not quite ready.

Nevertheless, even if you are in that happy position, it will soon be time to decide upon your approach to the new world of iXBRL accounts for corporation tax returns. There are several questions to resolve, and – as is so often the case – no single right answer.

Temporary or long-term solution?

One of the first questions to ask is whether you are going for a “stop-gap” fix or straight to your preferred long-term solution. Many are opting for a short-term solution, at least for a few months or even for a year or two. With several of the software packages only recently released – and one significant supplier still to release theirs – some businesses and practices have taken the view that they do not have time to get up and running with a completely new system without skimping on such important things as testing and staff training. They are continuing to prepare accounts in the way they have done hitherto, producing (for example) a Word document, and then outsourcing the XBRL tagging to a specialist supplier who turns it into an iXBRL file ready for submission. Another option which enables you to stick with your tried-and-tested accounts production processes – either indefinitely or just for the time being – is to use conversion or tagging software which helps you to make the iXBRL file yourself.

‘Full’, ‘minimum’ or ‘minimal’?

Another question to resolve is how much tagging you will do. Some software gives you the choice. You can tag the accounts completely; or for the next two years you can resort to partial tagging, using the so-called “minimum” list of tags. Or, in the light  of HMRC’s “soft landing” guidance released last month, if you are using accounts production software that automatically puts in tags for you, you can for the time being just stick with the tags your software provides and not worry about choosing any further tags manually. In an extreme case, where your software package is not ready in time, that might be as few as the dozen or so “validation items” that are needed to clear HMRC’s electronic gateway. This could be described as minimal (as distinct from minimum) tagging.

Some are planning to take the “minimum” approach now, and move to full tagging after a year or so, rather than wait until full tagging is required.

What if your accounts production software is not ready?

If you are already using accounts production software, it does not make much sense to jump ship at this stage. If you are a practice with several clients, your deadline really is imminent, as you will almost certainly have some whose own deadlines fall soon. You will be using the iXBRL-enabled version of your existing package. The main practical issue here is the time you need to spend on manual tagging. Experience so far ranges from “dead easy – just click the iXBRL button and there was little or nothing to do” to “struggled for three hours”. Much depends on the complexity of the accounts and the extent to which you have departed from the software’s standard templates. For the time being, if you get stuck, you should be able to fall back on the “automatic tags only” provision in HMRC’s soft landing guidance.

What if you do just accounts production, or just tax?

It is time to talk to whoever does the rest of the job and get respective responsibilities clear. If, for example, you are in practice and you just do a tax return and have hitherto taken completed accounts in Word from your client (or another professional adviser), you need to decide whether they will in future supply you with an iXBRL file, or whether it will be your job to convert it. This sort of issue may need to be clarified in your engagement letter.

These are just a few of the questions to be resolved in the next few months, weeks or – if you have an April filing to submit and you can’t get it in before the end of this month – days. Despite HMRC’s lenient soft landing, there is no escaping that your first iXBRL accounts will entail pain: extra time, extra cost or both. And the first beneficiary will be the UK taxpayer in general, rather than your business in particular – albeit that many will reap significant efficiency benefits in due course. However, it will be better next year: most systems will “remember” what tags you used this year, so you will have to do them again only if there are significant changes to the layout of the accounts.

Paul Booth is technical development manager at the IT?Faculty of the ICAEW

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