HMRC and XBRL Annual Accounts requirement from 2010

HMRC requirement for XBRL Annual Accounts is seen by software houses and accountants as a means of imposing themselves on small businesses!

Many small businesses where very relieved when audit exemption came about. As it meant that they could finally ditch the auditor, who they saw as performing a non-beneficial service. A cost without benefits. This is clearly seen by the number of small businesses that have now dropped the audit.

Many small business people are not accountants, but that does not mean that they don't prepare their own accounts (with or without computers) for their own consumption. A majority of small businesses do just this, without recourse to third parties, in order to minimise costs and retain control of the business. If it works for them, who are we to judge otherwise.

With XBRL Annual Accounts becoming a mandatory requirement in 2010 this independence will go, as the level of complexity in XBRL is way beyond the average person to comprehend and requires a computer with appropriate software. The fact that this software does not exist at the moment, does not seem to concern anyone in a position to halt or slow down this requirement. The fact that computers are becoming an absolute necessity to run a small business due to legislative requirements, also does not seem to concern them. What they fail to realise is that a small but significant proportion of small business owners do not use or wish to use computers in their business. Their reasons do not concern us here, but it is a fact.

Some respondents to earlier comments seem to believe that XBRL will be ‘invisible’ to its users. Let me quote from a HMRC communication I have received:

"... Companies and accountants will require both accounting and tax software systems to be XBRL enabled..."
further on
"... principal benefits of streamlined financial reporting are for customers. Software vendors benefit from being able to supply updated versions of their products that support XBRL ..."
and further on
"... XBRL enables integration of accounts production and tax software and both are required by software vendor’s customers ..."

The above statements give in a nutshell why software companies like XBRL; as invisibility comes at a price.
And, if a business does not have the software or time to devote to mastering XBRL, (and few will, given that it is an annual event) they will be forced to pay a firm of accountants, or a similiar establishment, for a service that provides no real benefit to them. Just like the audit - a cost without benefits.

Being a software developer myself, I have looked in detail at how to produce full XBRL Annual Accounts from an ERP package. It is possible, but not easy given the mixed structure and flexible requirements of annual accounts. Of course the differculty will vary for each package, but overall my feeling at the moment is that most packages will make it a new chargeable module. Time will tell as to whether I'm right on this.

In all the material I have seen on XBRL every one; including HMRC; claims that there will be benefits. But nobody can give one clear example of a real benefit for a small business. Many false benefits are claimed. A real benefit; from the imposition of a new tool/procedure; is one that does not already exist using existing tools/procedures. That is, it must be a NEW benefit. And I repeat, I cannot see one clear new benefit, nor can I see one arising. The imposition of XBRL will replace, what is now a simple exercise (using anything from expensive software, through a simple spreadsheet, to a typewriter and plain paper) with tools and procedures that greatly increase costs and complexity.

Why do I focus on small businesses? It will be small business that produces over 85% of the XBRL annual accounts actually produced in a year. So yet again, it will be small business that bears the cost of the ambitions of big business, government mandarins and claims by people with vested interests. The very same groups, that many believe have in the past shown a complete disregard for the small business.

XBRL in and of itself is a useful vehicle for a limited number of organisations – my estimate is less than 250,000 worldwide. What I am against, is its imposition on businesses (over 50 million worldwide) that will bear the cost, complexity and un-usability of it all, without any form of benefit.

If other people fail to see this and get lost in the hype; as has happened many times before with software that has promised the earth and delivered a pup; so be it. But I for one do not follow the herd on XBRL.

VAT 100/101 GovTalk Gateway

Acceptum Business Software by Rowanberry Consultancy Ltd has become one of the first ERP business software packages for UK SME's to be approved by HMRC for the submission of VAT 100 and VAT 101 (EC Sales List) Forms in XML format via the Governments GovTalk Gateway.

Use of the Gateway for these returns is seen as a distinct advantage for those companies/groups that submit 3 or more returns a quarter. As no more manual form filling will be required and VAT payments can be made via Direct Debit once the company/group has registered with HMRC to use this facility. The VAT forms are submitted via a few mouse clicks once verified as being correct via the normal reporting processes within Acceptum.


Note - do not confuse these XML VAT submissions; which will ease workload; with the proposed use of XBRL for Corporation Tax and Annual Accounts mentioned is another section of this website. The latter XBRL submissions; when they become mandatory; are seen by us as an unwarranted imposition of an over complex solution to a problem that can be addressed right now using simple current technologies - namely PDF files; for the submission of supporting annual accounts by the vast majority of registered companies.

UK XBRL and GAAP Reporting

The UK Government is working towards imposing the submission of Corporation Tax Returns and accompanying Annual Accounts in XBRL format from 2010 onwards.

Yet XBRL is at this moment is an incomplete standard with very little software able to support it. But academics and large businesses are pushing it forward.
Why?
When XBRL will yield no benefit for small businesses that will be compelled to use it from 2010 onwards! And that is the majority of users, given the large number of small businesses in the UK, compared to large organisations.

Yes - large organisations and stock markets may like it; although the inconsistency of the data will produce a lot of dangerous and unstable business decisions

Yes - large accounting firms and consultancies will definitely love it, as for them it is seen as a brand new income stream

Yes - HMRC may like it as they can reduce manpower in 2010 and beyond when they make it mandatory for companies to submit accounts and Corpn Tax Returns in XBRL format.

But - for 95% of businesses (under 20 employees) this move by HMRC/Companies House to impose XBRL on them for Corporation Tax Returns and Annual Accounts will be a nightmare that will greatly increase the costs of these annual events.

If you look at the development of the XBRL standard, it does not take long to realise that big business, large software houses and large accounting firms (those driving the development of the standards) have a vested interest in making the taxonomy and standards as complex as possible. So that they become the only people who understand it and thereby stand to create a lot of money out of the use of XBRL by small business when Government bodies make its use compulsory.

What is my proof for this - take the XBRL GAAP draft standard published 15 May 2004; using the smallest font size available will still take 700 pages to print the 5 XSD/XML files that specify this standard.
In an introductory document dated 13 June 2004; I quote -
" ... the UK GAAP taxonomy was aimed at a user base which was going to be looking for, say 200-300 key elements out of a generic taxonomy of 3,500..."
That’s less than 10%.

And this for a draft standard for which the previous draft contained 1783 key elements; now at 3,486 key elements. This number will only get bigger as drafts are expanded to handle more business types.

Yet small businesses that can now produce Corpn Tax Returns and Annual Accounts in a day using tools like MS Excel will be expected - no required - to take the time and effort to understand XBRL, its structure and use. Then to troll through 3,500+ key elements looking for those 200-300 elements that they need.

This is a dream - no a nightmare!

I myself have over 20 years experience of software and its development and over 30 years in preparing accounts for large and small businesses. I understand programming, IT analysis, XML, XSL etc. so I am not new to reading such documents. Yet when I look at XBRL I am horrified by its complexity, bloat and its complete un-usability. It also lacks any consideration for the MAJORITY of users that will need to compile and build XBRL documents.

Then in addition, from all this effort, I believe, small business will receive NO benefit at all, other than to satisfy the mandatory demands of Government Departments. I even doubt that the tax inspectors will know what they are looking at when it comes to using the annual accounts submitted in such a manner. For the quality of such accounts will be poor, given the absurdity of the draft standard as it stands.

What I would like to see is some realism in the XBRL standards that are focused on producing real benefits for the majority of future users. That is the small business.
Not XBRL standards derived by those with the most to gain from their imposition on a disparate user base, that at the moment does not have a voice.

Small business must wake up to this threat before the 2010 deadline in order to avoid a major catastrophe.