November 2009

HMRC recently announced that they will require all UK companies' tax returns, including statutory financial statements, to be tagged using Inline XBRL.  This requirement will affect an estimated 1.6 million companies in the UK, with the earliest affected those companies with April 2010 year-ends.

Jon Rowden, Peter Smithson and Divyesh Parekh have recorded a webcast to look at the far-reaching implications of this requirement, the implementation choices for companies and PwC’s recommended actions.

What does this mean?

Essentially it means that HMRC will be able to automate their analysis of corporate tax returns and supporting documents statutory financial statements. For that to happen, current disclosures made to HMRC will need to match to pre-prepared electronic lists of disclosure items.

What is the likely impact?

For UK companies this adds up to an additional objective being introduced to the preparation of statutory financial statements and tax returns.  For management the size of the task will depend on the number UK-taxed entities under their control and the degree of complexity of their financial statements. 

What are the key messages?

• XBRL is arriving soon – the earliest affected are April 2010 year-end companies, who are already in month 7 of the financial year that is affected by the new requirement.
• Companies have real choice over how to implement XBRL tagging and it unlikely that one approach will fit all.
• Appointing an individual in the company to be responsible to weigh up the options and devise a plan makes sense.  We expect action will come naturally once XBRL implementation becomes a part of someone’s day-job.
• The challenge of applying XBRL is essentially one of disclosure – matching up statutory financial statements disclosures to the HMRC’s list of XBRL tags.  Accuracy, completeness and consistency will be expected and whilst some matching will be relatively straightforward, there will be elements of the tagging where exercising judgement and decision making will be necessary.
• Software and technology has a role to play, but it could be a mistake to approach this requirement as purely an IT issue.

View the webcast