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.

 

What does the end of HMRC’s ‘soft landing’ really mean for filers?

When iXBRL tagging was first required for Corporation Tax filing and the ‘soft landing’ introduced to allow companies and accountancy firms to understand the new process, HMRC indicated that during the first two years they would exercise some leniency by not investigating companies solely on the basis of poor quality tagging.

However, it can be inferred from this statement that when the ‘soft landing’ does finally expire at the end of March 2013 there will be a tightening of the reporting regime with greater scrutiny and analysis of the tagging.

The need for accuracy and transparency

So, although tagging according to the Minimum Tagging List continues, contrary to what some had predicted, the main result of the expiry of the ‘soft landing’ transitional period will be the need to refocus on the accuracy of the tagging to avoid unnecessary HMRC investigations.

HMRC will expect companies to be transparent in their tax assessment; low quality or limited tagging could be taken as showing a lack of transparency.  After March 2013 it can be assumed that HMRC’s risk assessment procedures will be actively looking for anomalies that point towards potential issues.

What are the risks involved in incorrect tagging?

We expect HMRC to use exception-based reporting to identify companies that have ratios well outside the norms for their peer group.  If a company is applying incorrect tags to its financials, it is likely to come under the HMRC spotlight in the future.

Minimise the risks with Seahorse®

Using Seahorse companies can mitigate these risks and choose to tag according to the MTL or the full taxonomy.  Seahorse makes it easy and the learning engine simplifies the task of choosing the right tag.  Speed of tagging and accuracy are the watchwords.  We’ve recently seen figures from HMRC reporting that Seahorse reached a 99.9% pass rate at the Gateway, illustrating the accuracy of Seahorse tagging.

With Seahorse you and your clients are in very safe hands.