online company tax returns and ixbrl: the end of transition? a talk to aat birmingham branch 8 th...

Online Company Tax Returns and iXBRL: The end of transition?

A talk to AAT Birmingham Branch

8th May 2013

Steve CoadTechnical Advisor – CTSA MachineryHMRC (CTISA)

Project Name: HMRC v1.8 | 19/04/23 | 2

What we’ll cover tonight

• Some background to mandatory online filing using XBRL

• A bit about XBRL and its benefits

• What HMRC is doing with the data

• For policy formation and monitoring

• For risk analysis and tax compliance

• For debt analysis and recovery, etc

• Current challenges – end of transition and new accounting standards

• HMRC’s digital strategy and some thoughts about the future


CT returns: the digital journey

2003 Online filing becomes possible

2007/8 10% filing online. Lord Carter’s report

2009 Online filing with XBRL becomes possible

April 2011 Online filing with XBRL becomes mandatory

First two years 3.5 million online returns received including XBRL data

85% using one of about 50 commercial products to file; 15% using free HMRC product designed for companies with the simplest affairs

Part of the HMRC Digital Strategy


The experience so far

Two years to 31 March 2013• This was a major change. A big collaborative effort.

• Some companies filed early year 1, to avoid the online requirement

• But great majority filed successfully, including required iXBRL elements

• 3.5 million compliant online returns successfully delivered so far

What about the quality?• HMRC announced a transitional “soft landing” period, aiming for maximum

successful filing first time round

• Early sampling suggests most achieving acceptable quality

• Software products are doing a good job of tagging automatically

• Many agents are putting a lot of effort into making it even better


The Policy context: Why are we doing all this?


The Past: preparing data


The Past: processing and storing data


The Past: analysing data


Why XBRL?

• Online filing has been uncontroversial, though some have questioned mandation

• The benefits of XBRL have been less well understood

• What is “iXBRL”?


So what is XBRL?

What’s in the tin?


Amount of dataAmount of data

To 31 December 2012 we had receivedTo 31 December 2012 we had received

2,754,868 sets of accounts2,754,868 sets of accounts

15,327 IFRS submissions15,327 IFRS submissions

2,987,206 sets of computations2,987,206 sets of computations

186 million pieces of accounts information186 million pieces of accounts information

85 million pieces of computational information85 million pieces of computational information

Spread across 7,823 XBRL tagsSpread across 7,823 XBRL tagsOf which 1,722 have been used more than 1,000 timesOf which 1,722 have been used more than 1,000 times

Usage not limited to Corporation tax riskUsage not limited to Corporation tax risk


What does HMRC do with all that data?

We are using and learning

• Government Gateway validations – is it complete?

• Automated risk rules run on all returns. Technical risking group.

• Results flag risks, which are fed to Inspectors for review.

• Case-specific risk checking, using Magnify tool

• XBRL risks looked at with other risks

• Quality of tagging. Central review. Raise issues with software provider / agent

• Looking for incremental improvement over time


Policy monitoring and formulation

• For the first time, we can use and analyse all the information in accounts and computations efficiently

• This will allow much better sector understanding

• Analysis of data to monitor the effects of Policy and law changes

• Inform Policy development, identify issues and opportunities

• Better business intelligence for Treasury

• Also key to better tax risk analysis and case identification. The following slides give some examples

• Huge wider potential in other areas of HMRC work. For example, to support debt analytics and recovery action. See slides further on.


Using XBRL data for risk analysis

The following slides give some insight into what we are doing here


XBRL

480

FEEDBACK

EnquiryOfficer

Risk-flowManager

CTData

Lists Produced

External Submission ofCT Return, Accounts &

Computations

XBRL Tags

Risk Rules

CT 600

ResultsMagnify

Government

Gateway

BDCT, Connect,TPI,BVD


log10 Wages -3.76vLnSocial Security Costs

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00

Ln Social Security Costs

Lo

g 1

0 W

ag

es


Exchange rates used

31/12/2010 1,547.1000

31/12/2010 1.9628

30/09/2010 1.9000

30/09/2010 1.5730

30/09/2010 1.5730

30/09/2010 1.5730

31/12/2010 301,700,000 1.5700

31/12/2010 -200,000 1.5700

31/12/2010 1.5657

30/11/2010 1.5625

31/12/2010 1.5500

31/08/2010 -17,077,000 1.5500

30/09/2010 1.5500

31/12/2010 1.5471

28/02/2011 1.5435

31/12/2010 20,800,000 1.1700

31/12/2010 9,500,000 1.1700

31/12/2010 13,000,000 1.1700

30/09/2010 1.1557


Risk Rules for Development

Claim to roll over reliefDeferred gain

Claim to other CG reliefDepreciatory transaction noted

Claim to foreign tax relief in the CG compNegligible value claim

Section 171A transfer outSection 171A transfer in

CG loss relief greater than £25,000Computation noted depreciatory transaction

Chargeable gain exceeds £100,000March 1982 valuation used

1965 CG valuation usedMarch 1982 indexation claim

Indexation allowance on March 1965 valuationCG proceeds exceed £500,000

Chargeable gain less than £25,000 Date of disposal matches accounting period date


Report of the independent auditors to XXX Limited

4th April 2012


Improving HMRC’s debt analysis and recovery

The following slides give some insight into what we are doing here


Overview of ADEPTCollections System (IDMS)

Provides 6,000+ HMRC staff with ability to collect by letter, inbound/outbound

telephone, field force, legal proceedings

Debt Analytics System (ADEPT)

Decision Engine (Strata)

Optimise collections strategies using ODS data

Raw Debt Data History retains all data for 6 years after debt closure

Standardised Debt Dataall raw data aligned to a standard data model

Performance Data

interactive data sets containing KPIs and

other metrics

Debt Analytics Portalprovides business with self-service access to

performance information and dashboards

Analytical Modelling

produce predictive models of debtor risk & behaviour, analyse

collection strategy effectiveness

Operational Data Store (ODS)

Provides a resilient and

high performance

“current” view of analytical

data to inform operational

systems

Head of Duty SystemsDebt data fed from each tax

system: Corporation Tax, VAT, Self-Assessment, PAYE, Tax Credits

Banking SystemsPayment data fed through to each

Head of Duty system

Debt Collection Agencies

Single CHAPS payment

Itemised payments

Direct payments by customers

Debt data


The future: Using predictive models to make decisions

Proportion of Debtors Becoming Insolvent by Number of Fiscal Years of Liabilities In Instalment Arrangements

0%

1%

2%

3%

4%

5%

6%

7%

8%

0 1 2 3 4 5

Number of fiscal years of liabilities in instalment arrangements

Per

cen

t o

f d

ebto

rs b

eco

min

g

inso

lven

t

VAT CT PAYE

1. Define a target for the model to predictPredict whether

HMRC will incur tax

losses due to

company insolvency

2. Understand baseline trendsBusiness insolvency

estimated as 1.1%

nationally by

Experian

3. Search for predictive dataBusiness insolvency

increases for

companies having

multiple VAT and

PAYE payment plans

4. Build models to combine predictive dataBuild and test

multiple models on

historical data not

used in step 35. Add the prediction to our decision rulesInsol Risk

L M H

Letter..

TelVisit

.

Specialist..


The Present: channels – job done?

CORPORATION TAX TRANSACTIONS 2011-12

Digital

Face to face

Post

Telephone


Beyond “soft landing”: What happens after transition?

There will be no dramatic change• HMRC will continue to seek to encourage and support

• Increasing emphasis on quality and quantity of information

• No appetite for rejecting returns, unless it’s really necessary

Full and accurate tagging reduces the risk of unnecessary enquiry

• Automated checks flag risks. Less tagging = more flags = closer attention

• Good quality, up to date software is key

Evolution not revolution – no change without consultation

• New taxonomy for tax computations and detailed profit and loss account from Autumn 2013

• New taxonomies being developed for FRS101 and 102 from 2015. Early adopters to use existing IFRS taxonomy to tag

• “Minimum tagging” will wither on the vine as new taxonomies come through

New CT Comp Taxonomy

Uses latest XBRL standard

Easier to use

More focused

Can be used for APs ending on or after 1 April 2013

Mandatory for APs ending on or after 1 April 2014

NO minimum or Full List. All within minimum tagging requirement

New Detailed Profit and Loss Taxonomy

Can be used for APs ending on or after 1 April 2013

Mandatory for APs ending on or after 1 April 2014

Used to tag DPL account in Accounts or computations

All within minimum tagging requirement

Structure allows all of the DPL to be tagged.

Current Requirement

CT Return CT600 & supplementary pagesAccounts Ct Computation

FormatCT600 – XMLAccounts & Computations - IXBRL

Accounting StandardsInternational Financial Reporting Standards – IFRS

UK Generally Accepted Accounting Practice – UK GAAP

Financial Reporting Standard for Small Entities – FRSSE

XBRL TaxonomiesCT Computational TaxonomyUK IFRSUK GAAP

Financial Reporting Changes

New Reduced Disclosure IFRS

New UK GAAP

Revised FRSSE

EU Micros Directive

Reduced Disclosure IFRS

FRS 101

Reduced disclosures from EU-adopted IFRS

Voluntary

Effective date - accounting periods beginning on or after 1 January 2015

Early adoption possible

New UK GAAP

FRS 102

Unlisted Entities

Based on IFRS for Small and medium entities

Major Change

Mandatory for accounting periods beginning on or after 1 January 2015

Early application is permitted for accounting periods ending on or after 31 December 2012.

FRSSE

Smaller companies continue to use FRSSE

FRSSE updated for consequential effect of FRS102

Updated version applies for accounting periods beginning on or after 1 January 2015

May be further aligned to new UK GAAP in future

Simplified Accounting Requirements for Micro Entities

EU Directive - Member states can decide extent of implementation

Micro defined as companies that do not exceed two out of three of the following size criteria

Turnover £578,000

Gross Assets £289,000

Number of Employees 10

Shorter Statutory Accounts

Exemption from prepayments and accruals

Optional for companies

Consultation 27th February 2013 to 22nd March 2013

Problems and Issues

New XBRL Taxonomy required for accounts using FRS101 and FRS102

Early adopters of FRS101 and 102

Micro Directive – Scope and implementation date

Micro Directive - Taxonomies


Post Implementation Review

• HMRC is preparing a PIR during 2013 of the change to online filing

• Currently being scoped. Will publish late this year

• Will revisit and revalidate the assumptions in the Regulatory Impact Assessment

• Will look at operational performance and customer impacts


The wider context for XBRL in accounts

Joined-up services• Internally, between taxes and duties and systems

• Across Government, supporting efficient services and Digital by Default

Special relationship with Companies House

• New services

• XBRL data and the public record

XBRL in the real world

• A business opportunity?

Adoption in other countries

Financial services and internal record-keeping benefits?


Thank youSteve Coad

HM Revenue & Customs – CT Process Team

Abbey House (2nd Floor, West)

TelfordTF2 9RG

Tel. 03000 573552

[email protected]

online company tax returns and ixbrl: the end of transition? a talk to aat birmingham branch 8 th...

Documents

hmrc v1

hmrc digital strategy

xbrl data

analysing data slide

future slide

better slide

mandatory online filing

free hmrc product