Contractor accountants will probably be wondering whether the taxman is going to stick to its word and be lenient towards businesses that were unable to file their corporation tax returns using iXBRL.

HMRC has sent letters to software developers promising sympathetic treatment for the next two years due to iXBRL software packages that are unable to handle the new Minimum Tagging List requirements.

However, the letters also warn that the Revenue expects companies to progress towards full compliance before the 1st April 2013.

Accounting software giant, Sage, are still having problems meeting the tagging requirements laid down by HMRC. Software solutions provider, IRIS, pointed out that Sage customers could be approached by the Revenue after submitting their returns. IRIS’ product director, John Pattenden, welcomed the news that HMRC will not immediately reject returns that do not comply with MTL, but customers will need to rely on the goodwill of the Revenue in order to go on operating and submitting returns.

Meanwhile, accountants and tax advisers have been warned that the cost of implementing the necessary iXBRL software could lead to expenses rocketing. The system is meant to highlight key information automatically but experts claim that 20% of tagging will still need to be done manually.

Donald Drysdale, the assistant director of tax at ICAS, said UK advisers will see an increased administrative burden due to iXBRL. The profession is already trying to help struggling businesses and they now have the dilemma of whether or not to pass on the additional costs of iXBRL reporting to their clients.

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Accountants should be aware that the end of the present tax year is fast approaching and HMRC has reminded the UK small business community that changes to corporation tax are imminent.

As from the start of the new tax year, corporation tax filing and payments will need to be made electronically. Furthermore, all company tax returns for accounting periods that ended after March 2010 will also have to be filed in XBRL or iXBRL format.

Payment of corporation tax will have to be made by Direct Debit, credit or debit card, using either bank transfer or the BillPay service.

An HMRC spokesperson explained that these changes will affect associations, charities, clubs, co-operatives and societies as well as any limited company. Firms will be able to use commercially available software to file or the department’s own CT software aimed at firms with less complex taxation affairs, the Revenue added.

As from April next year, firms will also have to submit their VAT returns online.

Meanwhile, the Institute of Directors is calling on the government to reduce corporation tax until it reaches 15% in 2020. People are starting to think of the UK as a high-tax economy and that will not encourage foreign companies to invest here.

The IoD wants the UK to have the lowest rate of corporation tax throughout the world. It has estimated that this could be achieved at a cost of £9 billion a year, a figure which could be achieved by continuing restraint on public sector growth.

By reducing corporation tax to just 15%, the UK would be sending out the strong message that it is open for business.

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The CIoT and the other main professional accountancy and tax bodies have sent a letter to the Exchequer Secretary asking the government to reconsider the timing of compulsory iXBRL online filing. However, it seems unlikely that HRMC will bow to the request.

The ACCA last week flagged up the lack of software capable of handling iXBRL. Chas Roy-Chowdhury, head of tax at ACCA, said they had been trying to negotiate a deferral with HMRC for some time but the furthest they’ve got is a promise of a light touch on compliance when the system is first implemented.

Accounting software provider Sage has admitted that its new iXBRL product will not be ready in time for the corporation tax filing deadline of April 1st. The company says it will have an interim product available, but the release of the full version will be delayed. CCH has not yet delivered its integrated package but has indicated it will be ready in time.

It will be possible for people using Sage accounts production software to file UK GAAP and IFRS tax returns. They will receive a temporary product, ONESOURCE, from Thomson Reuters, which includes the minimum requirements for iXBRL filing.

Contractor accountants will be able to compile tax returns as usual within Sage software and then transfer the data into ONESOURCE. The majority of this process is automated but some IT experts believe this could add a lot of extra time onto the filing process.

In addition to understanding the mechanics of iXBRL, accountants using Sage now need to learn how to transfer data into ONESOURCE and there’s just 3 months left to do it. They will then need to learn Sage’s iXBRL product when it is released later this year.

Will this workaround cause accountants to lose faith in Sage and switch to another software provider? Only time will tell…

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If it wasn’t so tragic. Mark Hall, who is Deputy Chief Information Officer at HMRC, has been praising the performance of their Aspire programme, which is the outsourcing deal between HMRC and Cap Gemini brought in to replace its tragically inept EDS precursor.

Mr Hall is claiming that they are on track to delivery £1.2bn of savings across HMRC’s total IT spend by 2017. This, if true and if actually achieved, will be something to celebrate. If it happens, that is: you will forgive me for being just a little bit sceptical.

For one thing the contract was let in 2004 and was for a ten year deal. By my sums that means it expires in 2014, so why Mr Hall is talking about a success planned for 2017 is a little unclear. Surely the point is to appraise the deal in 2014, at the end of its natural life, to see if it’s worth continuing to 2017 and beyond? (Actually OGC rules say that high value contracts need to be re-evaluated after five years and re-tendered after seven, but let’s not dwell on legalities, shall we…)

Secondly the original contract has already been renegotiated three times, in 2006, 2008 and 2009. This last one resulted in a significant saving, which is good, but you have to worry about the quality and accuracy of the earlier negotiations if it takes four goes to get it right.

And finally the £1.2bn would be a little more credible if the total savings to date were a little more than £152m. I’m not clear if that is from the original start date or from the 2009 revision, but neither would appear to indicate the final figure is any more than an Aspire-ation (sorry…).

So I’m sorry, Mr Hall, close but no cigar.

Some of his other statements offer a worrying insight into the mentality of HMRC management as well. It seems to be a source of some pride that their website is the third busiest in the world on filing day, handling over one billion transactions. From my knowledge of capacity planning that is not actually something of which to be proud. The infrastructure to support that level of business costs a lot of money. For eleven months of the year it will be twiddling its thumbs waiting for the January rush to start. Wouldn’t it be better to work out how to spread the load across the year? Who knows, you might even find you only need half as much hardware in the first place.

As an aside, HMRC are looking at moving the year end away from Aril; 6th. They have come up with two dates, March 31st, which is actually a little more sensible, or December 31st, which is utterly barking. But in these days of self-automating iXBRL-based online filing systems, hasn’t anybody considered spreading the load across the year? Oh sorry, that would mean HMG would have to rethink its annual issuing of departmental budgets and that would never do. I mean, the Departments would have to think about what they were spending rather than simply ensuring they’d spent everything by April so that they get the same budget for the next year (I believe one MOD team bought futures in coal supplies to use up their fuel budget, despite there not having been any coal-fired ships in the Navy for some fifty years. Heigh ho…)

Mr Hall talks about these savings being a necessary part of reducing the government’s deficit. Can’t argue with that. But he goes on to say “The reduced budget is a driver for efficiency, not a blocker. We need to do things differently.” Yes, Mr Hall, let’s give that a try, since what you do now clearly isn’t working very well at all.

And the other thing: Mr Hall witters on about is improving the “customer experience”. Look, let’s be clear, your sole aim is to collect what I owe you. I am not your customer and you do not provide me with a service. Robert Heinlein used to caution against excessive consumption of alcohol on the grounds that it made you shoot at tax collectors and miss. I think he had a point…

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Accountants in the Birmingham area may benefit from visiting an event to be run by HMRC.

On November 3rd, the Revenue will be holding the last of its iXBRL events. This event will showcase accounts production and conversion tools that can convert existing data into iXBRL format for the filing of Corporation Tax returns.

HMRC has already run a couple of similar events in recent months, however the London event in June was probably held a bit too early as working versions of the software were not readily available at that time. People really have to see the program to appreciate the way it works, a programme manager from Carter commented.

The accounts/tax software production industry should have more commercially released products to show by the time the Birmingham show comes around. Forbes Computer/Absolute Accounts, TaxCalc and QMS have already launched iXBRL software and IRIS and Thomson Reuters will be launching products in the not too distant future.

A survey conducted earlier this year by CCH showed that many accountancy firms were not prepared for the new online submission system. As from 1st April next year, corporation tax returns must be filed in in-line eXtensible Business Reporting Language. This could cause problems for accountancy firms that file clients’ corporation tax returns from third party data as this is often in either paper or pdf format.

If you want to go to the Birmingham event, HMRC would like you to telephone the bookings team on 0845 603 2691 so they have an idea of the number of visitors who will attend the morning and afternoon presentations.

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HMRC has published a guide for businesses and contractor accountants explaining how they need to comply with the iXBRL format computations for Corporation Tax online filing.

The iXBRL guide for UK businesses is 14 pages long and is available online from HMRC’s Corporation Tax Library. The guide has been designed to give senior managers an introductory overview, so that they can cope once online filing becomes mandatory in April.

The guide explains that it is up to the company to make sure it fully complies. Companies should ensure their computer software is capable of handling the requisite type of data required for the reports.

The transition to iXBRL format accounting is going to be complicated and the Revenue accepts that there might be errors and omissions with tagging. But HMRC would like to help businesses get to right as opposed to penalising them.

Two iXBRL roadshows have also been planned to give businesses and their accountants a chance to get hands-on experience. The first of these will be held at Glasgow’s Hampden Park on September 15, followed by St Andrew’s Stadium in Birmingham on the third of November.

CCH software has also created a practice tool to help people prepare for iXBRL. Users answer various questions about current working methods and the software they use, and the iXBRL Practice Planner compiles a short report highlighting areas of concern and ways of tackling them.

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Contractor accountants and accountancy firms are not yet prepared for the new online filing system for corporation tax returns that HMRC is introducing next year.

The new system requires all data to be converted into iXBRL (in-line eXtensible Business Reporting Language) and the majority of online accountants, 92%, are undecided on how exactly to convert data into this format. iXBRL is meant to make the comparison of financial data easier.

Converting the data can be a time-consuming process and coupled with a lack of a formal relationship agreement could result in unplanned extra costs and a drain on resources next year.

Nearly a third of accountants submit corporation tax returns on behalf of clients based on information that has been produced by third parties. Of this information, 52% is submitted in paper format and 48% in pdf format, which is the least friendly of the iXBRL formats.

Earlier this month HMRC produced a list of software companies which can produce iXBRL technologies but only 3 out of the 20 companies listed can compile company accounts in the new format.

Companies such as Sage, claim the requisite software will be ready by November, but many experts believe this will be too late.

Donald Drysdale, the assistant director of Tax at ICAs said that HMRC needs to set out more clearly the requirements and how they can be met as half of the accountancy firms are having problems identifying the software package they need.

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