online company tax returns and ixbrl: the end of transition? a talk to aat birmingham branch 8 th...
TRANSCRIPT
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)
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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
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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
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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
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Why XBRL?
• Online filing has been uncontroversial, though some have questioned mandation
• The benefits of XBRL have been less well understood
• What is “iXBRL”?
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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
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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
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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.
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Using XBRL data for risk analysis
The following slides give some insight into what we are doing here
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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
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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
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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
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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
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Report of the independent auditors to XXX Limited
4th April 2012
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Improving HMRC’s debt analysis and recovery
The following slides give some insight into what we are doing here
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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
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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..
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The Present: channels – job done?
CORPORATION TAX TRANSACTIONS 2011-12
Digital
Face to face
Post
Telephone
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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
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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
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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?
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Thank youSteve Coad
HM Revenue & Customs – CT Process Team
Abbey House (2nd Floor, West)
TelfordTF2 9RG
Tel. 03000 573552