Business accounts to be tagged at what cost?

From 1 April 2011 HM Revenue & Customs will expect company accounts to be submitted electronically and to have key data within them “tagged”.

HMRC will require all companies to file accounts and Company Tax Returns online in iXBRL format (inline eXtensible Business Reporting Language).

HMRC expects this move to provide benefits in the preparation, analysis and communication of business and financial data. To achieve this, certain elements of the tax computation and the accounts ‘documents’ will need to be tagged using a series of ‘taxonomies’, which labels entries in the document so that the data can be understood by computer systems.

This may be a worry in the longer term since, after a couple of years, HMRC may have gathered enough data to use its analytical engine to identify if your figures do not match the rest and could result in you being picked for an enquiry.

In the shorter term, these measures could increase either your workload or costs, since accounts can no longer merely be prepared using word processing software or spreadsheets and then submitted online in a pdf format. A new iXBRL system has to be used so that the “tags” can be automatically read.

HM Revenue & Customs is providing simplified software to help with this process but they openly admit it can be extremely slow and cumbersome to use, let alone only being designed for the simplest of situations.

There will also be a requirement to pay any Corporation Tax electronically, although in reality this only means you cannot send them a cheque directly. Paying a cheque in at your bank etc will result in HMRC receiving the funds from them electronically and so enable you to meet this requirement without having to worry about internet security. Other electronic payment methods include BACS, Direct Debit, CHAPS, debit and credit card payment.

These measures will avoid paperwork and payments being lost. They will also enable HMRC to dramatically cut its staffing whilst still giving it the ability to identify those cases that it considers need closer scrutiny. It has been indicated that HMRC will not just act upon the reports that will come from the computer in due course and that a person will have a chance to speak out before an enquiry is launched.

However, will the staff be suitably experienced to handle this at the time?

The whole issue of tighter controls and other forms of 'red tape' was clearly a major bug bear for SMEs at the Haines Watts roundtable event last summer. With David Cameron’s recent ‘enterprise’ pledge, perhaps the subject should provide the focus for another roundtable, as firms struggle to make headway after the recession and with the cuts taking place?

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