Transcript E-filing of Company Tax Return
E-filing of Company Tax Returns
Jeff Smith, Customer Contact, Online Services,
Agenda
• What is XBRL?
• XBRL benefits.
• Taxonomies.
• What attracted HMRC to XBRL?
• The Company Tax Return.
• Approach to CT e-filing.
• Next steps.
9th June 2006
What is XBRL? -
“ think of bar coding for financial data items”
• eXtensible Business Reporting Language.
– just another member of the XML (Extensible Markup Language) family. – XML now widely used in business systems around the world.
– very well proven technology.
– HMRC has been using XML systems for several years.
• XBRL is the only standard created specifically for financial data – there is no competing standard.
– XBRL 7 year gestation period - no one is going to create an alternative!
• Will make spreadsheets look like something from the stone age!
9th June 2006
XBRL “Vision”
• ICAEW involved in XBRL work in the UK from the outset.
• September 2004 report: – “ …. It seems clear that a widely accepted digital reporting standard is capable of delivering real benefits ……. Is relevant to people throughout the business reporting supply chain: producers of business reports, software vendors, accountants, auditors, financial analysts, investors and creditors.” 9th June 2006
XBRL “Vision”
• Described in an ACCA paper published in 2004.
• “One touch record keeping”.
“ By linking businesses’ accounting software packages to the revenue departments’ e-business platforms ‘one-touch’ record keeping could be achieved. The accounting system would automatically aggregate all of the relevant transactions, and prepare the tax return and payment instruction, ready for approval. The business owner would provide the approval (via the keyboard) on the due date. The return and payment would then be submitted electronically.” 9th June 2006
“XBRL is expected to be the key technology here, as it has the potential to change the entire financial reporting process.”
XBRL benefits to companies and accountants
• XBRL enables the streamlining of end to end financial reporting - not just at the stage of reporting to Government.
– improved data quality - key to increasing efficiency - reduction in re-keying and data correction.
– improved audit processes.
– aggregation of data for accounts preparation.
– flow of data to tax preparation and filing services.
– streamlined internal financial reporting processes.
– better data for shareholders and financial analysts.
– in a data-driven world business processes become capable of further evolution. Or should this be “revolution”?
9th June 2006
Potential for revolutionary processes?
• Will a data-driven world: – reduce the volume of data required by Government? - better quality might mean less!
– reduce data duplication?
– reduce the need for HMRC to ask questions?
– enable HMRC to ask more focussed/relevant questions?
– act as an enabler for moving towards a real-time environment?
– enable HMRC to take more account of accountants internal processes and standards?
These may be opportunities that we (HMRC, accountants, companies, software vendors, professional bodies) should explore once “basic” XBRL services are in place.
9th June 2006
More extravagant benefits claimed!
• In USA seen by some as a key factor in national economic success.
“
The Congress should fully fund the development of the XBRL project championed by SEC Chairman Cox so that U.S. companies can take advantage of this financial reporting system that allows investors and analysts to compare company performance. I understand that this project is estimated to cost approximately $3.5 million to complete. Given the dramatic economic benefits that will accrue to the U.S. from the comparatively small cost of this project as well as the long term enhancement of the competitiveness of our capital markets, supporting this effort with federal dollars is well justified .”
Newt Gingrich - speech to House of Representatives, House Committee on Financial Services, 26th April 2006 9th June 2006
Taxonomies
• Taxonomies are being created to represent data at summary level – this is the level we work at for CT Return filing - to be mapped to tax and accounting software.
– UK GAAP, IFRS, Companies House taxonomy, CT Computation taxonomy (already published).
– HMRC assisting with work on UK GAAP.
• XBRL General Ledger taxonomy will represent individual transactions – a separate track of work (not part of HMRC’s CT e-filing initiative) required to realise the full benefits of XBRL for industry.
– enables data aggregation – improved internal reporting capabilities – improved audit – “drill down” to lower levels of data 9th June 2006
What attracted HMRC to XBRL?
• HMRC first became aware of XBRL in 2001.
– What attracted us: 1 potential to provide a simpler filing process with a streamlining of linkages between 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.
9th June 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
9th June 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 9th June 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 9th June 2006
Phased approach
• • • 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.
9th June 2006
XBRL accounts next
• Will be able to accept XBRL accounts as soon as suitable accounts taxonomies are available: – Companies House (small, audit exempt) – UK GAAP (HMRC are assisting with development) – IFRS • 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).
9th June 2006
Next Steps
08/05/06 - v6
Collaboration
Assist with move to mandatory e-filing Accountants Representative bodies Software vendors Very small companies?
Returns due after 31/03/2010 Companies House UK GAAP taxonomy Considering feasibility of single filing of accounts for CH/HMRC purposes HMRC assisting with review Publication due soon
Recent changes
Technical Pack published on HMRC web site Software vendors - start now on CT computation products Agent authorisation (64-8) now online 9th June 2006
Further tasks
08/05/06 - v2
Software vendors
How do we encourage integration of business, accounting and tax systems?
Improve consultation
Online Forums?
Email newsletters?
List consultation forums?
How do we reach smaller firms?
Testing
Deliver test services earlier Capacity testing complete by March 2009
Government Gateway
Look to improve handling of agent credentials 9th June 2006