If your finance team is collectively twiddling its thumbs; if you have weeks of spare capacity in the calendar to resource the shift to mandatory filing of tax returns and associated accounts in iXBRL, congratulations. This issue won’t be one of your headaches for 2011. If you don’t and you haven’t given the matter much thought, read on. iXBRL conversion needs your attention now.
Given the public sector belt-tightening we see all around us, it is no surprise that HMRC has been tasked with cutting its cost base and making its exchanges with taxpayers more efficient. Nor will it come as a surprise that the onus is on the finance departments of UK limited companies to change the way they do things - and bear the implementation costs along the way.
Of course, it is absolutely right that our tax authorities should embrace today’s technology and collect data electronically. However, many companies seem unaware of, or unprepared for the change. I believe this will prove a costly lapse in concentration.
Also worrying is the tendency among those companies that are aware of the changes to adopt a ‘wait and see’ approach. Most seem comfortable with the idea that they have perhaps another year to find a solution and road test it. For instance, companies with a December year-end have until December 2011 to file their 2010 accounts and tax return. But for organisations with even moderately complex structures, this will be cutting things fine.
The sensible Finance Director will be aware that when it comes to HMRC filings, submissions need to be on time and correct. A return that is filed close to the deadline – only to be rejected – will soon take companies into the late filing penalties regime.
For complex groups especially, conversion to iXBRL will represent a large one-off cost, although the workload and expense should fall off sharply in year two.
Finance Directors who assess their workload early, could find efficiencies to be gained. Groups with multiple companies will obviously have a greater workload, as each set of accounts will have to be tagged. However, there are some cost efficiencies to be gained. Ask yourself whether all the companies within the group are needed or whether there are some that could be struck off. Consider this kind of query sooner rather than later, i.e. the year before the filing year.
Another work-around that will help in cutting compliance costs is grouping companies that are essentially the same, tagging them as one and then filling in the data. Again, suitable companies will need to be identified early for the technique to work.
Cost control for this exercise is certainly possible, but only if you leave plenty of time to address the practicalities. Overall the message is clear - the opportunity cost of leaving this task until the last minute compared to the cost of meeting it head-on is stark.