End of HMRC’s ‘soft landing’ – no room for complacency

The ‘soft landing’ finally comes to an end next week, so here is the last article in the recent series discussing the consequences and summarising some of the important themes.

A few initial questions:

  • Are you applying only the minimum number of tags just to pass the HMRC Gateway?
  • Do you know the difference between this and the Minimum Tagging List (MTL)?
  • Are you aware of what really happens at the end of March?
  • How accurate is your tagging?
  • Why is it wise to apply full tagging to your financials?
  • How much at risk of HMRC investigation are you?

You may think you’ve conquered the challenge of reporting to HMRC in iXBRL, but have you?

Complying with the mandate

Until now, it’s been possible to make successful filings simply by applying a very small number of iXBRL tags (around 13) to your accounts.  Assuming that this has been done correctly, the accounts will be accepted at the HMRC Gateway.  You don’t even need to tag to the full MTL, which gives you the choice of around 1300 tags, of which most organisations would normally use around 100.

Many believed that when the ‘soft landing’ comes to an end next week the MTL would disappear and were relieved to find that HMRC decided after all not to abandon it in favour of the full taxonomy containing around 5,000 tags from which to choose.

But it’s not the end of the story.  The MTL may remain for now, but the ‘soft landing’ is ending.

The hidden issues behind the end of the ‘soft landing’

Even though the MTL stays and you’ll still be able to use your 13 tags, there are other more important issues to be considered.

In May 2012, HMRC issued an interesting statement* that included the following:

“Some software products already support fuller tagging of accounts than is required by the list of specified information and others are coming to market.  More information with XBRL tags helps HMRC’s risk assessment, reducing the demands it needs to make on the majority of companies in assuring compliance with tax obligations.”

*http://www.hmrc.gov.uk/ct/ct-online/file-return/xbrl-tagging-120531.pdf

How should this be interpreted?  Effectively, that tagging more rather than fewer concepts is a way of showing HMRC that the company has nothing to hide.  There’s another HMRC statement highlighting the need for accuracy and transparency of reporting: “ …incorrect or missing tags may trigger HMRC’s risk-assessment rules – for example skewing one of our risk ratios…”  Together, these statements point towards tighter scrutiny by HMRC and a new regime in which tax inspectors will be less lenient, inaccuracies will prompt further investigation and risk ratios will be used to pinpoint organisations with results outside expected norms.

You can no longer afford to be complacent about your iXBRL accounts tagging.

How Seahorse® can help

Accuracy and transparency of reporting can be achieved using CoreFiling’s Seahorse tagging tool for the conversion to iXBRL of accounts prepared in Word and Excel.

You may choose to continue with your 13 tags to pass the Government Gateway or use the power of Seahorse to achieve greater transparency and avoid unwarranted investigation.  Prudent companies will choose to tag at least in accordance with the Minimum Tagging List or, ideally, tag against the full taxonomy.  The Seahorse tag suggestions engine makes even full tagging an easy task.  It automatically presents you with viable tag options, together with a confidence rating derived from the number of times each tag has been chosen for that particular concept by the community of accounting professionals now using Seahorse to convert their documents.  Importantly, the streamlined off-line review process, including free-text explanatory notes, helps to ensure accurate representation of the accounts before final sign off and submission.

Don’t ignore the end of the ‘soft landing’ and leave everything to chance.  Let Seahorse help you mitigate the new risks about to emerge.

Implications behind the end of HMRC’s ‘soft landing’

Much has been written about the end of HMRC’s ‘soft landing’, often promoting the common misconception that it just means the continuation of iXBRL tagging of accounts according to the Minimum Tagging List (MTL), rather than against the full taxonomy.

Whilst it is true that full tagging is not being mandated when the ‘soft landing’ expires at the end of March 2013, as was previously conjectured, there’s much more behind it.

Incorrect tagging is no longer an option

To quote HMRC: “… incorrect or missing tags may trigger HMRC’s risk-assessment rules – for example skewing one of our risk ratios – and this means there may be greater potential for post-submission contact from HMRC. That risk would be greater the less information from the minimum tagging list is tagged.”

The above statement dates from Mach 2011 and it is interesting to note that even at this early stage HMRC highlight the consequences of faulty tagging.  More recently (May 2012) HMRC issued a further statement declaring it would be:  “… continuing to expand the effective exploitation of XBRL, by quality assurance of XBRL tagging in a selection of returns already received and by development of the effective use of XBRL tags in risk assessment and other compliance work.”  This underlines the fact that HMRC intend to use the quality of XBRL tagging to apply greater scrutiny to a company’s accounts.

More tagging rather than less

It’s interesting to note that in the same statement HMRC also pinpoint the risks involved in minimal tagging.  The inference is that correctly applying a larger number of tags will actively help companies to avoid unwarranted scrutiny.  Completeness is the key.

How Seahorse® can help

With Seahorse you can take steps to ensure that your tagging does not put you under the spotlight.  The learning engine assists you in choosing the right tags to maintain tagging accuracy.  It presents you with tag suggestions derived from its cumulative knowledge of every tag chosen by all the professionals who have used it to tag individual concepts.  It’s been proven that these are not random suggestions, as the product has gained excellent results compared with others, and has reached up to a 99.9% pass rate at the HMRC Gateway.

Using Seahorse, you have the choice whether to apply full tagging or whether to use the Minimum Tagging List.

Whichever you choose, you can be sure that accuracy and transparency are assured.