Practical Experiences of Introducing XBRL for taxation to the Business Community in the UK

Jeff Smith

Customer Champion

Business Customer Unit, 6th May 2008

A brief history

• HMRC first became aware of XBRL in 2001.

– What attracted us:

1 vision of streamlining the end to end financial reporting

process - linking business, accounting and tax software.

2 access to data - rather than everything on paper.

3 picking up an external initiative - origins within the

financial community, not Government driven.

4 possible data standard in a wider government context.

A brief history

• March 2003 – e-filing service goes live (designed at the outset to become XBRL based):

– XML based Company Tax return form + tax computations + accounts (as pdf’s).

– Enabled proving of the basic service before adding XBRL.

• February 2006 – XBRL capability added:

– Allows computations to be submitted in XBRL format

– Taxonomy for computational items created by HMRC.

– Accounts as and when suitable taxonomies become available (UK GAAP & IFRS) and XBRL accounts are produced.

External review of HMRC online services

• July 2005 - UK Government

asked Lord Carter to advise on

measures to increase the use of

HMRC’s key online services, in

order to ensure sustainable and

efficient service delivery for

taxpayers, while continuing to

support compliance.

• March 2006 - UK Government

accepts recommendations in full.

Key recommendations (for XBRL):

• “All companies should be required to file their company tax returns

online, using XBRL …….. for returns due after 31 March 2010.”

• “Our view is that HMRC should not require online submission of

company tax returns until XBRL has been implemented and has

bedded down.”

• “We also recommend that they [HMRC & Companies House] should

work towards providing a joint filing facility so that companies and

their agents only have to submit the same information once.”

Ongoing work

• Getting XBRL “bedded down”

1. Improving taxonomies

– funding of further work on UK GAAP (including IFRS convergence).

– Discussions with tax software developers and accountants about

level of detail required in the tax computation is ongoing.

2. Rendering – a basic requirement

– Stylesheet not practical for complex accounts or computations.

– Getting the issue on the XBRL agenda.

– Encouraging technical debate.

– Deciding which solution(s) to support.

3. Developing “joint filing facility” with Companies House

Ongoing work – building the business benefits case

• Very important to HMRC that companies and accountants support the move to XBRL – discussions ongoing with professional bodies.

– Not generally accepted that external business benefits can be realised yet –

although XBRL is seen as a good idea in principle.

– Why should software developers enhance products when customers aren’t

asking for XBRL?

– Need to demonstrate that XBRL is a good thing for business.

– Remarkably few business cases have been published that demonstrate in

costed terms how external (non-governmental) entities benefit from XBRL.

– Finding examples; checking the facts.

– Generalised phrases, such as “steamlining the financial reporting process”,

aren’t enough.

Ongoing work – building the business benefits case

• Deloitte Australia have produced the most compelling business benefits case

that I have seen so far, but please tell me if you know of other examples.

• The following slides are extracted from a fuller presentation, which Deloitte

Australia have kindly given me permission to use.

• HMRC are talking to Deloitte about the applicability of this process in a UK

context.

XBRL enabling financial reportersSBR / XBRL International Conference – Brisbane November 2007

Why we’re excited!

Moving on from Luca Pacioli

• Ease of aggregation

• Retire or rejuvenate legacy systems

• Our people are engaged and enthusiastic

• Better analysis of client information

• Less time spent on ‘data drudgery’

The pilot system

A new approach

Map client trial balance

Calculate & validate report

data

Import data & generate report

Publish report Lodge Review

Map client trial balance to the

Deloitte Taxonomy to

produce a first run instance

Validate instance, compute

missing fact values and

store revised instance

Import instance

document into report

template

Add missing fact values such

as Director details, select

notes and publish to Deloitte

specification

Submit for Partner review and finalise for client sign off

Lodge instance to regulator

Lessons learnt

Jumping hurdles

Hurdle #1: Client accounting systems that can not produce XBRL instances

– Re-key or

– Convert

Result: we built a conversion tool

Hurdle #2: We need a financial report that is human (partner) friendly

– Re-key into MS Word and/or MS Excel or

– Automate

Result: we built a publishing tool

Hurdle #3: There is no published Australian Taxonomy

– Sit and wait or

– Get in and create one

Result: we created our own taxonomy

Financial reporting under “data drudgery”

16%

Administration of client engagement including setting budget, engagement terms and risk review

Financial reporting under “data drudgery”

63% 20% 1%

To prepare a financial report ready for review by the partner

Review Lodge

Financial reporting under “XBRL”

-86%

To prepare a financial report ready for review by the partner

This reduction in processing time alone represents a saving of 54% in total time

Map client trial balance

Calculate & validate

report data

Import data & generate

reportPublish report Lodge Review

More information?

Peter WilliamsCEO Deloitte Digitalpewilliams@deloitte.com.au+61 3 9208 7629

Bevan McLeod

Account Director

Deloitte Growth Solutions

bmcleod@deloitte.com.au

+61 3 9208 7767

Ongoing work

• Standardised Business Reporting

1. HMRC supports the concept but too early to predict what (if

anything) may happen in the UK.

– Some very high-level analysis of the potential scope has been

done.

– Work with Companies House on joint filing is a step in the right

direct – ensuring that we adopt consistent standards and

approach – sticking to XBRL standards and no proprietary

solutions!

2. In close contact with Netherlands and Australian project

teams.

Questions?