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June 2010

www.siftmedia.co.uk www. iris.co.uk

Executive summary
A revolution in the way HMRC accepts Corporation Tax returns is imminent. From 1 April 2011 computations
and accounts accompanying the CT600 will generally need to be filed online in iXBRL format. Accountancy
firms that currently use accountancy software to produce Corporation Tax returns and associated accounts
should be able to rely on their software provider to release upgrades in time to help them cope with the
changes required. Although tax returns and computations should be straightforward, accounts can be slightly
more complex. Many suppliers have already delivered the required update to the return and computation
element of their software but updates for accounts software are taking longer. Once the software suppliers
have delivered their updates, there may still be some situations when human intervention is required within
an Accountancy Practice in order to finalise a set of iXBRL-enabled accounts. Accountants should beware of
vendors that claim that their software can cover every eventuality without human input in the practice,
particularly when some discretion needs to be exercised before submission.

Even if your supplier is likely to do the bulk of the work for you, almost all Accountants and Bookkeepers will
need to know something about iXBRL “tagging” of their tax and accounts work in order to be able to complete
and review iXBRL–enabled output.

Currently HMRC accepts tax computations and accounts in file formats that make sense to humans, both in the
practice before the return is submitted and by HMRC upon receipt. However they cannot automatically be
interpreted or analysed by the computer systems within HMRC. With the introduction of iXBRL each e-filing
has a consistent human readable form, as before, but embedded within it is a “machine readable” version of
each element in the return that can be stored directly into the systems of HMRC for automatic verification and
analysis. The use of iXBRL will lead to more efficient, reliable and accurate methods of exchanging data which
will provide obvious benefits to HMRC.

Plans should already be well under way to undertake the various tasks firms will need to complete to ensure
they are ready to manage the transition to iXBRL. The iXBRL project needs to cover knowledge and
understanding of iXBRL through many parts of the firm and the setting up of a working party to manage the
process. The working party needs to consider responsibility for the new format documents; timings of the new
processes that will be required and establishing a review and control procedure.

With such limited time available before the mandation date, firms will need to compare their progress against
milestones that will show they are on track. They should also understand the product roadmaps and
deliverables of their software suppliers, to understand what level of support they will be providing and when,
ensuring that they know what level of knowledge of iXBRL will need to be maintained in Practice. It is clearly
important that there is plenty of time between installing software updates to cope with these new
requirements and mandation dates, to ensure everyone in Practice is ready to cope with the changes. They
may also need to consider an 'escape route' for any accounts that their mainstream process cannot cope with.

Although it may seem like unmitigated bad news at the moment, with more work and more cost and
apparently little benefit for you or your clients, there is plenty of help available from your software and
information suppliers, professional bodies and HMRC itself.

It is vital to act now and to ensure you know just what you need to do in the coming months.
Background

Online filing – from paper to data

Online filing has been with us for many years now and the benefits to those using computerised systems are
obvious. Rather than converting electronic information to paper, only for it to need to be converted back into
electronic format by error-prone manual re-keying, it makes good sense to transfer it directly in electronic
form. The recipient organisation – HMRC in this case – is in a position to realise significant processing
efficiencies while there are also benefits for those filing the information. They too should see some processing
efficiencies as well as peripheral advantages such as immediate confirmation of receipt.

iXBRL – what and why

There is a general need to exchange data efficiently that goes far beyond individual customer-supplier
relationships. This has led to proprietary data exchange mechanisms being replaced by more open, more
standard and more global methods. Given the importance of the Internet, it's not surprising that the currently
accepted standard for the electronic exchange of data is based on the relatively simple concept that makes
web pages work: a universal 'language'. This language started off as HTML – HyperText Markup Language.
HTML is text with the addition of 'tags' that define certain attributes of that text – whether it should be
displayed as bold, italic, blue or act as a link to another page. HTML is mainly concerned with controlling how a
computer should display information for humans to look at on a web page, but the idea of using a simple 'tag'
to determine how a bit of text should be displayed can easily be extended to including information about how
it should be processed in other ways. XML – eXtensible Markup Language – does just that, it uses a range of
tags to describe what the information represents as well as how it should be displayed. This quickly leads on to
an application of tagging to 'business' information in the form of XBRL – eXtensible Business Reporting
Language. XBRL uses tags to define where a particular item of text fits into a set of accounts for example.

Admittedly, once we get into XML and XBRL, things quickly become quite complicated. For XBRL to work, not
only do we need some sort of standard so that the tag 'profit before tax' is interpreted in the same way by any
computer system, but we need to consider where items fit into an organised structure. This is where
taxonomies fit in. A taxonomy provides a set of standard, agreed tags that classify an item according to an
agreed hierarchy. So, for example, we know that something tagged as 'Cash at bank and in hand' is part of
'Current assets', which in turn is part of 'Total assets'. The full taxonomy is very comprehensive and daunting,
so initially the accounts can be tagged from a simplified mandatory list of about 1250 items – but wil be
extended over the next few years.

Onto the final step, the i in iXBRL. Although XBRL allows a properly tagged set of accounts to be interpreted
and processed it provides little scope for controlling the presentation of those accounts. The i stands for
'inline' and is intended to deliver the benefits of automated processing while preserving the preparers' control
over the presentation of the accounts. iXBRL lets us create a set of accounts formatted as we like, but places
the all important XBRL tags with the related number or information, wherever in the formatted document that
number or information ends up. This allows the creation of a set of accounts that looks however you want it to
look, but embeds in that set of accounts, all the information a computer system needs to extract, interpret and
process every relevant item.

Hopefully this goes some way to explaining why HMRC have opted for the iXBRL solution to filing the
computations, schedules and, in particular, accounts associated with the CT600.
Timetable
Mandation of iXBRL is a very significant event and it is imminent as the HMRC website declares:

From 1 April 2011, for accounting periods ending on or after 1 April 2010, Company Tax Returns must be filed
online. A Company Tax Return comprises the CT600 form (including any supplementary pages), accounts and
computations, together with any other supporting documentation. In all cases where a Company Tax Return is
filed online, the computations must be in iXBRL format.
For most companies and organisations, accounts forming part of the return must also be in iXBRL format, but
there are exceptions. Where accounts are not filed in iXBRL format, they must be filed as a PDF attachment.

Tax computations
Tagging tax computations is relatively easy. Whilst structure is not well defined, what HMRC wants tagged is
set in stone and leaves little room for manoeuvre. You’ll therefore find that if you use CT600 software that it
will produce an iXBRL tax computation with the minimum of fuss, if any. Indeed, many software users will not
see any process change: the only sign of iXBRL being the option to output the tax computation as an iXBRL
document.

One of the first successful iXBRL filings with HMRC using the new release of IRIS Practice Suite was completed
on April 6 2010 by accountancy practice AC Mole, the firm that also filed the UK’s first electronic tax return to
HMRC in 1997. Paul Aplin, partner at AC Mole said: “The transition to iXBRL is a cause of concern for many
firms. However our first iXBRL tax computation filing experience with the new IRIS software release, has given
me a very welcome degree of reassurance that the process can be straightforward and painless.”

Although iXBRL accounts are a more complex proposition, your accountancy software supplier should have
plans firmly in place to deliver product releases in plenty of time to allow you to prepare for April 2011.
However, for accounts, it will not just be a question of installing a new accounts production software release.
This is because the requirement to tag accounts may require some human intervention, as discretion may
need to be exercised in the way iXBRL “tags” are applied, based on the specifics within that set of accounts.

Accounts
The further a set of accounts departs from a standard template, the less easy it will be to add the required tags
automatically. One option is to re-type the information from your accounts into the free HMRC form but this
will be laborious and time-consuming and need to be repeated year after year.

It might help to describe how the tagging process could work in practice. Your software is likely to be able to
automatically tag the majority of your standard sets of accounts. There will probably be a new option in your
software to apply the iXBRL tags to a set of accounts and even to display those accounts highlighting the items
that have been tagged. For a small number of accounts there may be a requirement for accountants to add
additional free form information to the accounts that is “non-standard”, in those situations an “iXBRL tag
editor” will be needed to tag additional items or to adjust existing tags, and should be provided within the
accountancy software being used. The tagged accounts will then be available within your business tax
application for attachment to a CT600 ready for filing electronically. It is vital that your software not only
supports automatic tagging but provide the facilities to edit and add tags for those accounts that have unique
or unusual characteristics – otherwise you may not be able to submit these sets of accounts using your current
application software.
The four accounts editing scenarios
There are four common scenarios that accountants will face when dealing with accounts that need to be
tagged. These scenarios are set out in ascending order of the amount of work that tagging is likely to require.
That said, no matter how automated the process, you should always make sure you undertake a thorough
review of what has been tagged. After all, it is this tagged information that HMRC will eventually use to analyse
the accounts.

Scenario 1: Software template requires no editing

The accounts can be produced entirely from the software’s template.

As long as you keep within your software’s template for accounts, then iXBRL-compliant accounts production
packages should produce the necessary iXBRL file without much intervention.

Scenario 2: Minor edits required to the standard presentation

The accounts are produced in the software, but with minor edits to the standard template presentation.

These may range from minor edits to the text of notes, to wholesale layout changes or changes to the chart
of accounts. To misquote Donald Rumsfield, the software suppliers are then in a position of having to tag
‘known unknowns’ and ‘unknown unknowns’.

‘Known unknowns’ would be like the items that might appear on a statement of total recognised gains and
losses (STRGL). Whilst you’ll quite often need to edit a set of accounts to get the STRGL correct, the range of
choices as to the headings to use is quite restricted, so usually the software can offer a choice and tag
appropriately.

‘Unknowns unknowns’ would cover something like changing the chart of accounts. Here the software doesn’t
know why you’re making the changes, and the changes could be almost anything. As a result, depending on
where the change is made, you may have to manually select an appropriate tag from the HMRC taxonomies. If
you have to select tags manually you may need to navigate between the full taxonomies and just the
mandatory list. HMRC only require those items in the mandatory list to be tagged, but will accept iXBRL
information from the full list. At least in the initial stages of achieving compliance, it is unlikely that many
accountants will be keen to ‘over-tag’ the accounts.

The question you need to ask your software provider is how advanced and automatic will its handling of these
scenarios be, and will it remember as much as possible from one year to the next to save you time?

Scenario 3: Final changes outside of accounts software

The accounts need to have final changes made in a word processor, such as Microsoft Word, prior to being
finalised.

No matter how advanced your accounts production solution, you may at some point need to make some
changes to the final output. Sometimes this is due to the application of niche accounting regulations, or it
might result from some specific changes required by the client beyond the capability of the software's
standard template. This is when accounts end up being transferred to a word processor for final editing.

The big question is whether your software will allow you to make those edits, whilst retaining the bulk of the
tagging work that the software has done? If it can’t do this then you are in effect facing scenario 4, untagged
accounts outside of your accounts production software. If, on the other hand, your software can retain the tag
information then you’re in a much better position, although you will have to make any edits carefully to ensure
that you don’t overwrite this tagged information.
Scenario 4: Accounts produced entirely outside of accounts software
The accounts are produced entirely in Word or Excel, or supplied by the client as a Word document or Excel
workbook.

Whether it’s because you don’t use accounts production software, your software doesn’t handle the format
you require or you receive the 'finished' accounts directly from the client, working with accounts produced as a
word processed document or a spreadsheet will pose considerable problems. You will either need to re-type
the information into a form or software product, or you will need software that is able to create the iXBRL file
directly from the document or workbook.

Whatever solution you use, be prepared to spend more time on your accounts. At a recent iXBRL event
organised by the ICAEW’s IT Faculty a KPMG representative estimated that, using KPMG's Word tagging add-in,
it would take an experienced person a whole day to tag a set of accounts. For small jobs this is not a trivial
amount of time, and you need to consider how you manage this additional cost within the business, or pass on
to the client.

Ten things you need to do now

So what do you have to do between now and next April? Well, the first thing to do is not to ignore iXBRL and
assume that your technology provider has everything covered. Although suppliers will no doubt deliver the
software required prior to the mandation date, iXBRL can entail more than just installing the next software
update.

Depending on your firm’s skill base, client base and structure, you will have to consider some or all of the
following points:

1. The wider knowledge of your firm: You’ve made a good start by looking at this whitepaper, but iXBRL
is going to impact all parts of your firm. Therefore you may need a 'hearts and minds' campaign to
ensure everyone appreciates what is going to be required of them.

2. Setting up an iXBRL working party. iXBRL affects many parts of your firm: IT, the tax and accounts
departments. So, to ensure people are appropriately engaged, you may want to form a working party
with people from these areas. This working party can then identify which parts of your firm are
affected by iXBRL, and ensure that all relevant departments are taking the appropriate steps.

3. Who is going to be responsible for the tagged document? Your firm may have split tax and accounts
departments, or you may operate an integrated department. Either way, someone at some point will
need to take ownership of the iXBRL tagging. That means that they will need to be responsible for
making sure that, not only is the automatic tagging of the accounts correct, but that any manual
tagging required is also complete and correct.

If you do have separate tax and accounts departments, then working out who should be responsible
could become an issue. Whilst iXBRL tagging is a requirement of the CT return and will be filed by the
tax department, the tagging of accounts will require intimate knowledge of the accounts and
accounting regulations. So allocating responsibility will depend on the skills available in each
department. Most importantly, you need to make sure that ownership is clearly defined.

4. When will you tag a document? Most of the time your software will take care of tagging for you but if
you do have to apply human judgement and include your own tagging, or add tags to changes you’ve
made, you need to think about when this should happen. Adding tags to chart of accounts changes
can happen at the time of the change, but areas such as the narrative notes in accounts change
 frequently, so you may want to wait before these are tagged.

The main thing to remember is that iXBRL tagging doesn’t change the numbers, so you definitely need
to have considered what is tagged at around the time the first set of draft accounts is issued.

5. What will your review process be? Ultimately the tags contained in the iXBRL documents will be what
HMRC use to analyse those documents. Just like any document submitted in an official capacity,
you’re going to want to know what is being submitted and be confident in its accuracy. You need to
decide how this review will be incorporated into your current procedures for any filing made that
includes changes or edits to the standard template.

Although the tagging review probably doesn’t need to happen at the very end, when it might impede
any urgent finishing work, the iXBRL is what is submitted to HMRC, so you need to ensure that what
you review is the final output that is actually submitted.

6. What evidence should you keep? The bottom line is that HMRC will have the iXBRL document and
investigations may well be based on the content of that iXBRL document. So, as well as having access
to the original iXBRL document, you need to think about keeping a summary that shows you what has
been automatically tagged and what you have tagged yourself.

7. What happens when you take on a new client? Inevitably different firms of accountants do things
slightly differently. Some will assign a cost as part of gross profit, whereas others may treat that same
cost as being outside of gross profit. Either way, iXBRL provides HMRC with a better tool to identify
any changes in approach, so you’ll want to consider how your iXBRL-tagged accounts may differ from
those of the outgoing accountant, and minimise the chance of provoking an investigation.

8. Testing your new processes. Once you survive the coming personal tax January deadline, don’t just
spend the next two months thinking about how to ensure that next year you will get all your clients'
work in much earlier! Instead, consider running some test jobs to see how your processes work.
HMRC is already accepting iXBRL documents, so you could even choose to test the entire online filing
process if you don’t mind sending iXBRL documents to HMRC early.

If you’ve never e-filed a CT return before, then this practice phase is particularly important. It may not
be exactly the same process as e-filing SA returns, so don’t wait until the last minute before you try
out your software’s CT e-filing functionality.

9. Is there an escape route? The April 2011 deadline isn’t going to move, so you need to make a
judgement regarding your software and your processes. Make sure you know the release dates for
your software and that you have properly planned the installation and implementation of the key
releases. The major accountancy software providers have web pages dedicated to informing their
clients and potential clients as to how they will support iXBRL.

Your escape route may well be to manually tag accounts in Word if you don’t feel confident about
your software provider. For simpler sets of accounts manual rekeying into the HMRC form might be a
short term option. Alternatively, there is nothing to say you can’t file a CT return early. So if you have
a particular client with a complex CT return and accounts due in April, it may well be worthwhile filing
that return early, prior to iXBRL mandation, so that your first iXBRL return in April isn’t one of your
most complex jobs.

10. Finally, Who pays? This is the big question. As we’ve discussed, whilst all the software houses are
doing their best to make sure that their software is iXBRL-compliant, you may still have to do some
 work yourself. Even if it’s just some minor note tagging and a quick review, even for the smallest of CT
jobs this could add time to the job.

If you bill the time back to the client, then you need to make sure they have been briefed on this
charge in advance. If you work on a fixed fee basis, then you will have to decide whether to increase
your fees or absorb the charge. Either way, you’ll want to make sure the client knows about the extra
value that you’re adding. How you go about dealing with the cost will also depend on understanding
whether the additional cost is a one-off or will be ongoing, and that depends on the work required
and the software you use.

Milestones
Depending on when you read this whitepaper, the following guide will either help you plan what you need to
have done by when, or make you aware of what you may need to do to catch up to ensure you are ready for
iXBRL filing. Whatever stage you are at, however far behind you fear you may be, your software supplier will
be doing their best to provide guidance on what you can do now.

•Make sure your entire practice knows about iXBRL

Summer •Form a cross-deparment working party to establish the impact iXBRL will have on your firm
2010

•Look to install iXBRL-compliant versions of your software, so that you're not having to make complex installations
or changes during the busy self assessment deadline period.
•Decribe the process changes that will need to happen at your firm to ensure you're happy producing and filing
Oct/Nov iXBRL returns.
2010 •Start to discuss with clients the impact iXBRL may have on their fees.

•Test your processes

Feb/Mar •Test your software, particularly if you've never e-filed a CT return before
2011

•File all your CT returns as iXBRL!

April 2011

•Once you have succesfully coped with the challenge of compliance, start considering ways in which your practice
After the can benefit from iXBRL
deadline
Further reading and advice
Although you will probably want to talk to your accounting software supplier initially, there are many more
general sources of information and support on iXBRL available:

HMRC – Corporation tax online filing http://www.hmrc.gov.uk/ct/ct-online/file-return/index.htm

AccountingWeb: http://www.accountingweb.co.uk/topic/technology

IT Counts: http://www.ion.icaew.com/itcounts/

IT Faculty: http://www.icaew.com/itfac

Tax faculty: http://www.icaew.com/taxfac

IRIS resources: http://accountancy-practice.iris.co.uk/news/news_articles/ixbrl_and_you.aspx

About IRIS Software

As the UK’s market leader, 14,000 accountancy firms (and most of the Top 50) rely on IRIS Practice Suite every
day to run their business. Iris Accountancy Software is proven to reduce workload and improve productivity for
practices of all sizes. So much so that IRIS has an impressive 95% customer retention rate.

If your practice is involved in Tax, Accounts, Practice Management or Company Administration, call IRIS on
0844 815 5555, or visit the website here.