The U.K. tax agency is pushing forward with plans to compel businesses by 2010 to submit tax documents in a machine-readable format that reduces the manual, error-prone work involved in processing filings.
Earlier this week, the U.K. government accepted a recommendation by HM Revenue and Customs (HMRC) that businesses file their reports using XBRL (Extensible Business Reporting Language). So far, the measure remains a proposal, but HMRC has its own legislative power to make the requirement mandatory.
XBRL is a specification for tagging financial information that allows various software programs to exchange the information.
Many of the accounting software applications on the market now can’t exchange information, said Peter Calvert, a director of XBRL UK Ltd., a consortium that has lobbied for use of the specification.
“There’s a lot of rekeying and manual effort which is going on behind the scenes,” Calvert said. “There really are benefits there to get everyone using a common computer language for financial data.”
Software companies are slowly but increasingly incorporating XBRL capabilities into their accounting products, Calvert said. Now, filing using XBRL is progressing on a limited basis, and the four-year delay before HMRC could make using XBRL mandatory will give businesses time to work out the technical details, Calvert said.
Companies House, the U.K. government’s registering authority for business, accepted its first XBRL filing in December for audit exempt accounts. Subsequently, HMRC announced last month it would accept XBRL tax filings for its Corporation Tax Online service.
Submissions in the format are voluntary at this point, Calvert said.
One primarily concern over implementation of XBRL has been taxonomy, the task of assigning computer tags to financial data. The complexity and variety of information contained within financial accounts makes developing a taxonomy difficult since it must conform to different sets of financial rules which can vary from country to country, Calvert said.
XBRL taxonomy evolves as accounting regulations are changed, he said.
Further, HMRC has its own taxonomy specifically for additional information that is filed for corporate tax calculations, Calvert said.
“Work has to be done to get to an agreed taxonomy, one that represents all the data correctly in an easy-to-use way,” Calvert said.
Opposition to moving toward XBRL has been stemmed by better education and technical documentation, Calvert said. Software houses needed technical example to make it easier to implement the specification, he said. HMRC also released a technical pack to explain the finer details of the XBRL, he said.
“As you move forward to help companies implement XBRL, you need to provide technical support, training,” Calvert said.