HMRC iXBRL

7 XBRL Expert Conversion Tips for your HMRC iXBRL Filings

The HMRC iXBRL mandate came into force in the UK on the 1st of January 2010, making it compulsory for businesses to send their Company Tax Returns online using iXBRL for accounts and tax computations. Subsequently, paper and PDF submissions of these reports to the HMRC came to an end with the exception of unincorporated charities, clubs, and societies who are still able to use PDFs for their accounts but still need to use iXBRL to tag their computations.

From April 1, 2011, companies incorporated in the UK must also make Corporation Tax and related payments electronically. This includes penalties for not filing Corporation Tax on time and any interest charged on overdue Corporation Tax. In this blog, we will explore some of the options companies have when it comes to iXBRL conversion of their accounts and calculations and offer some expert tips on how to accomplish a high-quality filing with the HMRC.

Whether an organization is eligible to file a Corporation Tax Return with the HMRC is characterized by a notice to deliver a Company Tax Return and is applicable to loss-making companies as well. Let’s begin by taking a quick look at all the entities in the UK to which the HMRC iXBRL mandate is applicable. Two broad groups of organizations need to file their accounts and calculations with the HMRC in iXBRL.

Registered Companies

Corporation Tax Returns must be filed by limited companies registered in the UK or by any foreign company that has a branch or office with a registered address in the UK.

Unincorporated Trading Companies

Trade associations, housing associations, member clubs, societies, and cooperatives are some of the companies that must file with the HMRC in iXBRL.

In addition to these, the HMRC makes a service available for unrepresented companies that have straightforward tax calculations on its website. We will explore this in a bit more detail in our next section.

One important detail of note is that even if companies employ external professional services to prepare their accounts and calculations, the responsibility to submit an iXBRL return to the HMRC lies with the director of the company.

In our next section, we explore some of the options companies have in order to prepare their iXBRL filing for submission to the HMRC’s online service.

iXBRL Filing Options

When it comes to iXBRL filings with the HMRC, companies in the UK have a few different paths they can explore. There are several factors that need consideration when deciding on the right course of action including company size, the complexity of accounts and calculations, existing systems and processes, and dedicated resources at hand to name a few.

Broadly speaking, there are 3 main avenues for companies for converting their accounts and tax calculations into iXBRL for submission to the HMRC.

Small Companies with Simple Accounts

For smaller unrepresented companies that do not use dedicated accounting software, the HMRC provides a free online service that enables filing Company Tax Returns using specially formatted templates for accounts and calculations. More information on eligibility can be found here.

Another optional joint filing service is provided by HMRC and Companies House for submission of full or micro-entity accounts over the internet as part of the Company Tax Return to HMRC as well as Companies House (which also accepts an abridged version).

While extremely convenient for smaller businesses, the drawback of using this service is that if the company’s financial reports are not in the format provided by the template, they cannot use it. More information on how to register and use this service can be found here.

Companies using FAP and Tax Preparation Software

Companies that utilize Final Accounts Production (FAP) or tax preparation software will need to check with their software vendor to understand if it offers the capability to deliver a fully compliant Company Tax Return. HMRC makes available a list of software and service providers that have successfully tested with them to demonstrate the capability to produce one or more elements of a Company Tax Return.

An important consideration for companies is to identify whether accounts and tax computations are produced at different times by different teams. Since both must eventually be filed in iXBRL, it is wiser to ensure that they are directly produced in iXBRL when first completed, instead of converting them ex post facto. However, internal processes differ from company to company, so the sequence in which these tasks are performed depends on a number of factors.

Companies Creating Accounts Manually

A lot of larger companies still use Excel, Word, or similar spreadsheet and word processing software to prepare their accounts and auxiliary documents. These companies have two options when it comes to iXBRL conversion of their accounts and calculations.

  1. They may elect to use software that can bring in data from Excel or similar programs and convert data into iXBRL. This may involve some level of manual effort to identify and apply tags correctly and is dependent on the software solution chosen by the company.
  2. They may outsource the entire process to a managed tagging service company that accepts traditionally prepared accounts and converts them to iXBRL with the appropriate tags. This is a cost-effective solution and one that usually doesn’t require companies to drastically change their own processes.

In our last and final section, we provide 7 expert tips for firms looking to convert their company accounts and calculations into iXBRL for submission to HMRC.

7 Expert Tips for UK HMRC iXBRL Conversion

Here are 7 quick tips from our in-house experts that companies can use to tackle iXBRL filings with HMRC leading to a high-quality error-free filing.

  1. Know the Components of the CT600 Form – the CT600 is a Company Tax Return form and is used to pay Corporation Tax that is owed by a company to HMRC. It contains information related to accounts, computations, reports, and statements of the company filing it. More information on this form can be found here.
  2. Find out What Options are Available for Filing – as previously mentioned, companies have a few different paths to choose from, for accomplishing their iXBRL filing with HMRC. it is wise to deliberate on the best course of action via internal discussions and come to a decision on how best to proceed taking all factors into account.
  3. Find the Right Solution Provider for your needs – it is imperative for companies to find a solution that works in conjunction with their existing processes and causes minimal disruption. For this, companies must identify pain points and prioritize what is most important to them from a features standpoint.
  4. Understand Available Taxonomies – taxonomies are dictionaries of concepts that are used to tag facts and figures in an iXBRL report that is submitted to the HMRC. There are broadly two types viz. the FRC accounts taxonomy for companies with 5 accounting frameworks under it and one for charities preparing their statements under SORP*.
  5. Avoid Basic Tagging Errors – these include rounding errors, missing dates, mismatches in context entity identifiers and company reference numbers, and missing UTR reference tags among many others. Working with external service providers who can provide expert guidance on specific issues is the best way to go for quick redressal.
  6. Establish Best Practices to Make Filings Smooth – companies can benefit from setting up standardized internal processes and nominating dedicated resources for filing to ensure a good level of quality, accuracy, and consistency. This can be achieved by way of templates, trained staff, and proactive engagement among other things.
  7. Choose a Solution with a Built-in Validator – a solution that comes with a built-in validator is capable of ensuring that the iXBRL filing with HMRC is free of errors and can pass with minimal changes. A solution offering an XBRL International (XII) certified validator provides additional assurance to companies in this respect.

*SORP – Statement of Recommended Practice

Get in touch with us today if you want to benefit from the best of HMRC iXBRL compliance reporting.

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A Practical Guide to HMRC iXBRL Tagging for CT600 Forms - Fin-X Solutions

The CT600 Form

The CT600 form is used by companies incorporated in the UK to file their Corporation Tax Returns to the HMRC after the end of their accounting period. At present, this period is stipulated to be no later than 12 months after the end of a company’s accounting period. The form includes information related to accounts, computations, reports and statements furnished by the taxpaying entity.

Any Corporation Tax that is payable to the HMRC is due after 9 months and 1 day following the end of the accounting period. The CT600 is only capable of reporting for 12 months, so if a company’s accounting period is longer, then two CT600 forms need to be filed, one for the 12 months, and another for the remainder of the period.

Paid by companies in the UK as a percentage of their profits, Corporation Tax is a function of the total turnover for a given financial year minus operating expenses. It currently stands at 19% for the financial year beginning April 2022 but is liable to change from time to time.

With the HMRC requiring digital submissions of the CT600 form, the original paper form is now obsolete and only used for reference purposes. The HMRC also requires full company accounts to be provided in Inline XBRL (iXBRL), tagging key information that enables the document to be both machine and human-readable. In contrast to the CT600 return, company accounts can cover an accounting period greater than 12 months.

Now let’s take a look at what constitutes the CT600 form.

The Components of a CT600 Form

The latest version of the CT600 Form for 2022 (version 3) consists of 5 main sections:

      1. Company information
      2. Return information
      3. Tax calculation
      4. Declaration, and
      5. Supplementary information

Let’s take a brief look at these sections.

Company Information

The company information section of the CT600 form consists of 4 fields:

      1. Company name
      2. Company registration number
      3. Tax reference (UTR)
      4. Type of company

Image 1.1.: Company information section of the CT600 form

The company registration number is a unique identification number that is obtained after registering your company with Companies House. At the time of writing, you will be registered for Corporation Tax at the same time as you register your company with Companies house.

Alternatively, if you’re already registered with Companies House but not for Corporation Tax, you can sign in to your business tax account by using your Government Gateway user ID and password to sign in. If you do not have one, you can create one when you sign in.

You must register for Corporation Tax within 3 months of starting to do a business. Failing to do so in time may incur a penalty. More registration information can be found here.

The Unique Taxpayer Reference (UTR) is a 10-digit number that you receive from the HMRC within 2 weeks of incorporation with Companies House. If you did not receive one, you can request one from HMRC and receive a copy by post to your company’s registered address.

Corporation Tax is paid to the HMRC on profits from doing business as:

  • A limited company
  • Any foreign company with a UK branch
  • Any club, cooperative or other unincorporated association viz. a community group or sports club

Return Information

The return information section of the CT600 form starts with the start and end dates of your accounting period. As mentioned before, accounting periods longer than 12 months require two filings of the form with the HMRC.

Among other particulars, this section contains questions about transfer pricing, accounts and computations as well as a host of supplementary pages.

Tax Calculation

This is the most critical and longest section of the CT600 and broadly contains fields related to the following information:

  • Turnover
  • Income
  • Chargeable gains
  • Profits before deductions and reliefs
  • Deductions and reliefs
  • Reliefs and deductions in terms of tax
  • Coronavirus support schemes and overpayments
  • Calculation of tax outstanding or overpaid
  • Tax reconciliation

In addition to these you will find sections on information about enhanced expenditures like Research and Development (R&D) and creative expenditures, land remediation expenditures and capital allowances and balancing charges among others.

Declaration

As the name suggests, this section is used to pronounce the correctness and completeness of all the information provided in the above sections while acknowledging that falsifying or concealing any information may lead to legal action.

Supplementary Information

This section is used for providing documentary evidence (should the need arise) to support any of the accounting and computational information provided by the filer above. PDF documents are accepted by HMRC for this purpose.

Getting the IRmark

Once the form is filled and all errors have been resolved, you are ready to submit your filing to the HMRC. A successful filing with the HMRC results in the generation of an IRmark. This is an alphanumeric string that helps a taxpaying entity prove if their submission held by the HMRC is correct.

An unsuccessful filing would result in a message from the HMRC with a list of errors and the reasons why the submission failed.

Submitting the CT600 successfully with HMRC

As the entire filing process can seem overwhelming at first, involving the conversion of financial statements to iXBRL, a lot of companies outsource this activity to a certified vendor.

Fin-X Solutions® is an HMRC-recognised iXBRL managed tagging services vendor and application provider offering a compelling choice for UK companies to outsource their iXBRL tagging and conversion process. We have been involved with XBRL filings in the UK for over a decade and provide our product and services in many other jurisdictions including the US, Ireland, the EU, South Africa, the Middle East, Malaysia and many more.

File high-quality iXBRL CT-600 documents on time with Fin-X Solutions

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CT600 Filings – For Microenterprises

A company tax return delineates the corporation tax payable to the HMRC and is filed using Form CT600. It broadly consists of data related to accounts, computations, reports and statements provided by the entity paying corporation tax. While these entities come in many shapes and sizes, the focus of our piece is on microenterprises. 

Microenterprises are typically small businesses with just more than 10 people and started with a small amount of capital (or microcredit) provided by a bank or other financial institution. Tax compliance can be a challenge for microenterprises that often do not have a dedicated finance or financial reporting team. Our aim is to provide an overview of CT600 filings with the HMRC in order to make the process easier to understand.

We will briefly touch on Corporation Tax and Company Tax Return in the UK to better understand the CT600 form that is submitted to the HMRC.

CT600 Filings – Corporation Tax And Its Implications

In the UK, corporation tax is tax paid by companies on a percentage of their profits, which is the total turnover for a given financial year minus operating expenses. It currently sits at 19% for small businesses but is liable to change from time to time.

This tax regime is applicable to companies in the UK that are incorporated and other entities such as clubs and associations. It does not apply to individuals, partnerships, and trusts. 

The taxpayer is responsible for calculating taxable profits as it is a self assessment system that includes checking if any tax adjustments are needed and if any tax reliefs or other rules apply.

While paying corporation tax late does not attract any penalties by itself, the implications of not filing the CT600 on time can cause significant detriment to the business. Filing accounts late will attract significant penalties with exponential increases in fines the later you file. Repeated delinquency will only compound matters.

Accounts should be filed on time irrespective of the ability to pay taxes at the time. The HMRC can be contacted in such a case and arrangements can be made. Late tax payments typically only attract a 3% rate of interest on outstanding due but if you’re a company that pays in monthly installments or deliberately pays the wrong amount, penalties may be incurred. Inability to keep acceptable records with respect to accounting periods may even make a company liable for a £3000 penalty.

As these penalties cannot be challenged in any court of law, timely filing of accounts is critical to ensure smooth functioning of any organization. Therefore, in the next section, we will briefly outline how best to prepare for these without disrupting critical functions within the firm. 

CT600 Filings – How To Prepare And When To File

Companies filing the CT600 with the HMRC need to ask the following questions before proceeding with a tagging or conversion solution:

  • Are there any constraints on the business preventing it from filing on time? 
  • Are there dedicated resources in place to handle the reporting process?
  • Is the process going to be conducted in-house or will it be outsourced?
  • Is the solution precisely addressing a specific problem being faced?
  • Is the solution viable to implement without an impediment to other processes?

At which point in the reporting cycle a company plans to start preparing its CT600 report depends to a large extent on internal process flows. With extremely competitive TATs, Fin-X Solutions’ IRIS CARBON(R) is prepared to tackle any scenario a company may find itself in. Therefore, it is essential to have a reliable vendor that can cater to any contingency that may arise and guide on the best course of action.

CT600 filings – How Can Fin-X Help

Since the entire filing process can be complicated, involving conversion of financial statements to iXBRL, a lot of companies outsource this activity to a certified vendor. This becomes all the more critical for microenterprises that often can’t dedicate resources to this activity.

Fin-X Solutions® is an HMRC-recognised iXBRL managed tagging services vendor and application provider offering a compelling choice for UK companies to outsource their iXBRL tagging and conversion process. We have been involved with XBRL filings in the UK for over a decade and provide our product and services in many other jurisdictions including the US, Ireland, the EU, South Africa, Middle East, Malaysia and many more.

File high-quality iXBRL CT-600 documents on time with Fin-X Solutions

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HMRC Company Tax Returns - Everything You Need To Know

A tax return in the UK declares a liability for taxation and is filed with HM Revenue and Customs. A company tax return, then, is filed by a company or association that receives a notice to deliver a Company Tax Return (Form CT603) from HM Revenue and Customs. 

Depending on who files the return and concerning different forms of taxation, there are a few main returns that are in use currently: 

  • CT600 – Used by companies who need to pay Corporation Tax
  • SA800 – Used by partnerships 
  • SA900 – Used by trusts and estates of deceased people 
  • SA100 – Used by individuals to pay income tax
  • VAT100 – Used to pay Value Added Tax
  • P35 – Used by employers for PAYE deductions and National Insurance contributions

Now that we know a little bit about the different kinds of returns filed with the HMRC, let’s take a closer look at Company Tax Returns and understand filing timelines.

HMRC Company Tax Returns - Timelines

Corporation Tax was brought to the UK as part of the Finance Act of 1965 along with capital gains tax which has since been abolished. It is taken from UK-based companies on the profits they make in the UK as well as on those of entities registered overseas but having a permanent establishment(s) in the UK. A return must be filed regardless of whether or not a company makes profits or has no Corporation Tax to pay. For those who are self-employed as a sole trader or are in a partnership, Self Assessment returns are used instead.

While Company Tax Returns may seem synonymous with just Form CT600, they include a lot more like a company’s tax and accounts computations and any supplementary documentation that they deem fit to provide. 

It is usually delivered no later than 12 months after the end of the accounting period. We have a more detailed look at this in our blog on CT600 filings. Detailed guidance on filing deadlines can be found here.

HMRC Company Tax Returns - Computations

 

Filing Company Tax Returns to the HMRC is an activity that involves a bunch of figures and requires a lot of arithmetic. One must include calculations to delineate how the facts in the Company Tax Return form have been derived from the figures in the company’s accounts, as part of your return. All the data considered imperative to explain the deduction of the figures in the Company Tax Return form should be included within a single iXBRL computations file.

Form CT600 contains a lot of fields related to the final computation of Corporation Tax owed that we have briefly touched on in our previous blog. Here, we will briefly describe Corporation Tax allowances and reliefs. 

When calculating total Corporation Tax owed, some deductions can be made to lessen the tax burden. Mileage, training, and accommodation are some of the allowable expenses one can claim as long as they are necessary to the business and wholly and exclusively for business purposes. It should be treated as a benefit if the above conditions are not. Purchases like machinery, vehicles, and equipment that are business assets are outside the scope of these allowances but may fall under claims for capital allowances.

Corporation Tax reliefs are another way for companies to exempt themselves from certain taxes and minimize their Corporation Tax bill. Here’s a list of certain reliefs that are available to companies that fit certain criteria:

  • Creative industry relief: When calculating taxable profits, companies involved in film, television, video games, etc. may be able to claim a larger deduction for themselves
  • R&D relief: Companies working on innovative science and technology projects may be able to claim this 
  • Disincorporation relief: When a company transfers assets to its shareholders (when there is a change in the ownership structure, for example), this relief allows it to dispose of those assets without incurring a Corporation Tax on the transaction
  • Patent Box: A lower Corporation Tax rate may be available for profits earned through patented inventions and certain other types of innovation
  • Trading, terminal, capital, and property income losses: If losses are made from trading, the sale or disposal of a capital asset, or on income from a property, this relief may be availed 

Now that we know a fair bit about some of the allowances and reliefs afforded by the HMRC, let’s take a brief look at different company types that exist under Company Tax Returns in the UK. The CT600 form requires making an entry as to the type of company and it may be left blank if a company doesn’t fall into any of the categories mentioned below:

  • Unit trust or open-ended investment company
  • Close investment-holding company
  • Company in liquidation 
  • No longer used 
  • Insurance 
  • Members’ club or voluntary association
  • Property management company 
  • Charity or owned by a charity
  • Real Estate Investment Trust (residual or tax-exempt company)

While the normal rate of corporation tax in the UK is around 19% for FY beginning 1st April 2021, lower effective tax rates are possible with the use of allowances and relief mentioned above that can almost halve that. Now, let’s take a quick look at the repercussions of late submissions.

HMRC Company Tax Returns - Consequences

The HMRC imposes penalties on those entities that fail to submit their Company Tax Returns to them in the stipulated time. The schedule of these charges for lapse is as below:

For returns that are late 3 times in a row, penalties are charged at the rate of £500 instead of £100. If tax returns for your company are more than 6 months late, you will receive a letter from the HMRC with a Corporation Tax figure it thinks it is owed. This is known as Tax Determination and cannot be appealed. It must be paid when you eventually file your return and the HMRC recalculates interest and penalties owed to it. 

It is possible to appeal a late filing penalty by writing to your company’s Corporation Tax office if you have a reasonable excuse. More information on what constitutes a reasonable excuse can be found here. Alternatively, you can call the Corporation Tax helpline.

If you’re wondering how to make changes to your CT returns post-filing, our next section addresses the steps you need to take to do so.

HMRC Company Tax Returns - Amendments

Per the HMRC, any changes to your filing must be made within 12 months of the filing deadline. To amend your Company Tax Return you can log in to the HMRC online services, use commercial software and send a paper return or write to your company’s Corporation Tax office. Importantly, the HMRC may conduct tax compliance checks and charge a penalty for errors in your Company Tax Return.

It is imperative to choose a solution that can provide you with an error-free filing experience so you can avoid penalties and file without care. 

How can Fin-X Solutions help with HMRC Filing

Fin-X Solutions® is an HMRC-recognised iXBRL managed tagging services vendor and application provider offering a compelling choice for UK companies to outsource their iXBRL tagging and conversion process. We have been involved with XBRL filings in the UK for over a decade and provide our product and services in many other jurisdictions including the US, Ireland, the EU, South Africa, Middle East, Malaysia, and many more.


CT600 Filings - Here Are The Things To Keep In Mind

CT600 Filings - Here Are The Things To Keep In Mind

A CT600 form is a company tax return detailing the corporation tax payable to the HMRC and broadly consists of information related to accounts, computations, reports and statements furnished by the tax paying entity. 

In order to better understand the CT600 form that is submitted to the HMRC, we will briefly touch on Corporation Tax and Company Tax Return in the UK. 

Corporation tax is tax paid by companies in the UK on a percentage of their profits, which is the total turnover for a given financial year minus operating expenses. Although liable to change from time to time, it currently stands at 19% for small businesses.

The corporate tax regime in the UK is applicable to companies that are incorporated (limited by guarantee or shares) and other entities such as associations and clubs. It is not applicable to individuals, partnerships and trusts. 

Since it is a self assessment system, the taxpayer is responsible for calculating taxable profits. This includes checking if any tax adjustments are needed and if any tax reliefs or other rules apply.

A company tax return comprises a form filed with a tax authority in the UK in which a qualifying taxpayer declares their income, expenses and other tax information.

Whom does it apply to?

Reporting annually on the health of their business to a regulating authority is a legal obligation for all businesses in most countries and the UK is no different in this regard. The submission of the CT600 form to the HMRC allows for the submission of a corporate tax return enabling qualifying entities to pay corporation tax as a percentage of their profits. 

So whom is it applicable to? The CT600 form is applicable if you are:

  • A registered company – any limited company or a foreign company with an office or branch in the UK 
  • Trading but not incorporated – this includes trade associations, housing associations, cooperatives, member clubs, and societies

A qualifying entity will usually receive a notice to deliver a company tax return from the HMRC regardless of whether the company is loss making or has no corporation tax due. The company director is responsible for submitting the company tax return and paying taxes duly even if an external vendor is employed to prepare financial statements and accounts.

What is filed in a CT600 form?

The following attachments will make up the online Company Tax Return pack that is filed through the Government Gateway and consists of:

  • The CT600 form in XML
  • iXBRL-based statutory annual accounts of the legal entity 
  • iXBRL-based computation of Corporation Tax 
  • PDF-based supporting schedules

Filers require understanding of the entire process as they need to deal with the following when preparing iXBRL accounts and filing company tax returns via CT600 online with the HMRC:

  • iXBRL creation, conversion and tagging of entity accounts
  • iXBRL conversion and tagging of corporation tax computations
  • Generating XML files of the CT600 return forms
  • PDF conversion of supporting schedules
  • Filing online (e-filing) by accessing the Government Gateway

When should you submit the CT600 form?

Filers filing the CT600 form will need to be mindful of two aspects namely company tax returns and corporation tax. So let’s break these down:

  • Filing Company Accounts – this has a deadline of 12 months from the end of the accounting period they are covering
  • Payment of Corporation Tax – for businesses with taxable profits < £1.5M*, this has a deadline of 9 months and 1 day from the end of the previous financial year’s accounting period

*Corporation tax is paid in four separate installments and the process differs for larger companies with taxable profits that exceed this figure

Except for a change in accounting date or for the periods where a company starts and ceases, corporation tax is charged for one year accounting periods. More than one tax return is required if the accounting period exceeds 12 months.

For a new business, it is possible that two Corporation Tax accounting periods exist as a single period cannot exceed 12 months in length. This means you may potentially end up with two sets of Company Tax Returns even though Companies House will need only one set to be filed. 

While the first accounting period will cover the first 12 months after inception, the second one will cover the rest of the remaining time till the end of the calendar year. This will regularize to just one Company Tax Return in subsequent years and qualifying entities will receive a “notice to deliver” from the HMRC apprising them about due payments. 

An inability to file on time can attract significant penalties. Below is a schedule of charges:

How do you submit a CT600 filing?

Having already outlined the 4 key components of the Company Tax Return pack that is filed through the Government Gateway, let’s take a closer look at some of key info that needs to be entered while completing the CT600 form: 

  • Company information – involves filling basic company information 
  • About this return – involves stating to which accounting period the return relates and if the accounts relate to the stated period or a different one
  • Tax calculation – involves stating the company turnover from the PNL account and calculating corporation tax due for the respective period 
  • Income – involves stating income received by your business including adjusted profit from the corporation tax computation, income from non-trading loan relationships, property income and trading losses brought forward and offset in the current accounting period
  • Profits before deductions and reliefs – pertains to the amount on which corporation tax is liable allowing you to also state particular types of losses
  • Chargeable gains – allowing you to state the increase in an asset’s value between the time it is purchased and sold, as well as allowable losses 
  • Deductions and reliefs – allowing you to state any trading losses, expenses, capital allowances and reliefs 

Corporation Tax allowances are deductible while calculating total tax owed and pertain to costs incurred for the singular purpose of running your business. There are quite a few Corporation Tax reliefs available to businesses as well that can aid in reducing tax liability. 

Since the entire filing process can be complicated, involving conversion of financial statements to iXBRL, a lot of companies outsource this activity to a certified vendor.

Fin-X Solutions® is an HMRC-recognised iXBRL managed tagging services vendor and application provider offering a compelling choice for UK companies to outsource their iXBRL tagging and conversion process. We have been involved with XBRL filings in the UK for over a decade and provide our product and services in many other jurisdictions including the US, Ireland, the EU, South Africa, Middle East, Malaysia and many more.

Fin-X Solutions – The perfect partner for all your iXBRL tagging needs

UKEF, UKSEF Taxonomy, iXBRL

UKEF, UKSEF Taxonomy, iXBRL


Structured Reporting for UK Issuers – Obligations & Expectations

Structured Reporting for UK Issuers – Obligations & Expectations

 

With the breakneck speed at which the digitisation of data is underway globally, the quality of this actionable information becomes the cornerstone of a well-oiled capital market. In a market like the UK that supports structured Annual Financial Reports (AFRs), analysis, accessibility and comparability of financial and non-financial data is far more easily facilitated, provided the quality holds up to an appropriate review. Structured Reporting  

The Financial Conduct Authority (FCA) and the Financial Reporting Council (FRC) have jointly addressed a letter to issuers with transferable securities trading on a UK regulated market. In their communication, they reiterate the obligation issuers have towards producing usable AFRs while setting some expectations on their quality. They also talk about corrective action that they may take should issuers fall short of these expectations.

So, let’s start with the obligations. What are they?

UK Issuers

Obligations of Issuers

The FCA has employed certain rules under the European Single Electronic Format (ESEF) mandate that requires UK issuers to publish their AFRs in a structured web browser format known as XHTML. They must be filed with the FCA’s National Storage Mechanism (NSM).

An issuer preparing consolidated financial statements using the International Financial Reporting Standards (IFRS) is further required to tag the financial data within their AFR using a digital classification, also called a taxonomy.

In view of the pandemic that affected everyone in early 2020, the FCA delayed the effective date of these requirements in November of 2020. However, it made changes to its systems, allowing issuers to file voluntarily with the NSM in the new format before they came into force mandatorily.

While the whole exercise was deferred by a year, we have finally arrived at the point where mandatory filing will come into force. From the 1st of January 2022, issuers will need to file their AFRs with the NSM for financial years starting on or after the 1st of January 2021.

To ensure that they are submitting the AFRs in the required format and with the appropriate level of quality, issuers will need to devote operational and managerial resources on an ongoing basis for this activity annually.

To check whether and to what extent these requirements apply, issuers will need to review the Disclosure Guidance and Transparency Rules (DTR 4.1) that can be found here.

The FCA specifies the ESEF taxonomy that came into force on the 31st of December 2020 for issuers that produce consolidated financial statements in the UK. In a quarterly consultation paper, the FCA has deliberated on which taxonomy and corresponding version should be made available to issuers to comply with their rules. They are aware that issuers may be using more recent versions of the ESEF taxonomy as used in the EU or even its UK-specific derivative, the UKSEF.

Now that we have a firm grip on the obligations of UK issuers as set out by the FCA and the FRC, let’s look at what their expectations are on quality.

AFR quality expectations

While change is an ongoing part of the world we live in, a transformation in the way corporate reporting is processed can create some very detrimental challenges for issuers who need to comply with them. These hurdles are mainly technological, due in part to the introduction of a new format that is now mandatory for AFR submission. That said, it’s still important for issuers to produce an output that is usable and of satisfactory quality.

While voluntary filings in the past year have proven to be great learning for a large number of issuers that decided to take the plunge early, issuers that will be filing for the very first time next year will need to be wary of a few things. The FRC’s Lab conducted a study reviewing a bunch of tagged filings not just in the UK but in the EU as well where ESEF has already been mandated. Their research discovered some areas where issuers may need to pay special attention in order to avoid issues with their final submissions.

Of special note is the fact that issuers are responsible for all the data drawn up and made publicly available under the DTRs. Both the FRC and the FCA therefore expect issuers to dedicate as much attention and care to their XHTML AFRs as they do to their PDF/printed ones.

They encourage issuers to file voluntarily while still possible to ensure they are familiar with the requirements and the submission process before mandatory obligations come into force.

If quality and usability of the submitted AFRs is not up to the mark, the FRC and FCA may take certain corrective actions.

Remedial actions that may be undertaken

The quality and usability of the structured AFRs will be considered by the FCA and the FRC’s Lab in the first year of mandatory submission. A follow-up of the Lab’s review of best practices is set to be published sometime in 2022. There is mention of further action that may be taken should quality not meet their expectations.

Fin-X Solutions’ SaaS platform IRIS CARBON® facilitates AFR preparation and submission in a highly secure and best-in-class SaaS environment.

ESEF, AFR, NSM, IFRS, UK Issuers, Structured reporting

ESEF, AFR, NSM, IFRS, UK Issuers, Structured reporting


ESEF iXBRL Filings 2020 - A Fin-X Solutions Study

The European Securities and Markets Authority introduced the European Single Electronic Format (ESEF) mandate to improve the way financial disclosures are made by listed companies in the EU and used by various stakeholders such as national regulators and investors.

The Inline XBRL or iXBRL format, in which the companies need to prepare their annual reports, makes corporate disclosures comparable across companies and sectors, while also improving their accessibility and quality.

The question to ask then is if the ESEF iXBRL mandate has made a difference to the quality of reporting by the companies it governs.

Team Fin-X Solutions conducted a study of the 2020 ESEF iXBRL annual reports of 447 companies in the EU and the UK. The study yielded several useful insights, which we will discuss below.

Scope and methodology of the Fin-X Solutions Study

The following image will give you a snapshot of the Fin-X Solutions study.

ESEF iXBRL reporting

Source: Fin-X Solutions internal study

We studied the ESEF iXBRL filings of 447 companies across 13 EU countries and the UK (14 countries in all). The companies belonged to 25 different industries. Over half of them were small caps, 21% were mid-caps, and 13% were large caps.

As many as 225 companies belonged to countries in which filing the 2020 annual reports in iXBRL was mandatory — Austria, the Czech Republic, Germany, and Slovenia — while 222 companies had filed in iXBRL voluntarily.

Our research methodology involved downloading the zip packages constituting each company’s iXBRL submission from the respective country’s Officially Appointed Mechanism and running each filing through our in-house validator IRIS Bushchat®. Two types of validation results were recorded.

We found over 50,000 tagged concepts in the 447 companies’ filings and a little over 8,000 extensions.

A note about tagging and extensions: Tagging involves mapping the disclosures in an annual report to the corresponding concepts in the ESEF taxonomy. Extensions or extension elements are custom tags formed to represent disclosures for which the right-fit concept cannot be found in the ESEF taxonomy. The correct practice is to study the ESEF taxonomy and identify the concepts that pertain to your disclosures. Extensions should be used only when necessary for ESEF reports to be of high quality.

Validation errors and warnings

Our validation checks revealed that only 176 of the filings we studied were totally error-free. The remaining filings threw up 3204 errors and 11609 warnings in all. 

What are errors and warnings?

An error is defined as an issue in an ESEF filing that needs immediate attention. A filing with errors risks being rejected by the OAM if the errors are not rectified. An example of this is a faulty ESEF iXBRL zip package which is not in compliance with the ESEF reporting manual.

A warning is less severe than an error and does not impede submission through the OAM as it may still be considered a valid ESEF filing. Warnings need to be checked and corrected, nonetheless. Rounding errors are an example of this type of issue.

Note: Our analysis was based on the tagging of the 5 primary financial statements by the companies using the ESEF iXBRL standard. Subsequent phases of this mandate will require companies to tag notes and other detailed information which may increase the percentage of errors and warnings in subsequent filings. 

ESEF filing errors — Country-wise distribution

A few observations from the country-wise distribution of ESEF errors:

Over a third of the companies whose filings Fin-X Solutions surveyed were from Germany. 

Among countries with at least 5 ESEF participants, France was found to have the highest proportion of companies with mistakes in their ESEF filings (71%).

Belgium and Slovenia had the lowest proportion of companies with mistakes in their ESEF filings (33%).

ESEF iXBRL reporting

Table 1: Country-wise Distribution of ESEF iXBRL filings

ESEF filing errors — Industry-wise distribution

A total of 25 sectors were part of our study and the table below illustrates how many companies from each sector were studied along with the total number of errors that were found in their AFRs.

ESEF iXBRL reporting

A surprising finding from the study saw the Financial (BFSI) sector come out with the most errors in their ESEF iXBRL filings, followed by the Consumer Cyclical sector in a close second. This may call for special attention as the concepts provided by the ESMA reference taxonomy may not be fully in line with current reporting practices and there may be a need to create custom elements or extensions.

We will now take a brief look at the industry-wise breakdown of the quality of ESEF iXBRL filings from 4 countries, 2 where the ESMA ESEF mandate was made compulsory and 2 where it was voluntary. 

ESEF iXBRL filing errors by German and Slovenian companies (by industry)

As mentioned earlier, it was mandatory for companies in Germany and Slovenia to file their 2020 annual reports in the iXBRL format.

We surveyed 153 companies across 11 sectors in Germany and 9 companies across 7 sectors in Slovenia. The results from these countries are presented below.

ESEF iXBRL reporting

The Consumer Cyclical sector in Germany was found to have the most errors (376) spread across 33 companies followed by the Healthcare (117 errors across 17 companies) and Financial (104 errors across 22 companies) sectors.

In Slovenia, an insurance firm was found to have 85 errors in its ESEF filing. This was followed by a firm in the Wholesale and Retail Trade sector with 7 errors in its ESEF iXBRL report. 

ESEF iXBRL filing errors by companies in the UK and France (by industry)

We surveyed 18 and 55 companies in the UK and France, respectively. Here’s what we found on assessing the quality of their ESEF iXBRL reports: 

ESEF iXBRL reporting

Companies from the Basic Materials sector in the UK had the most errors at 105, spread across 3 companies. This was followed by companies in the Utilities and Chemicals sector with 103 and 98 errors respectively.

In France, the situation wasn’t much different with the Utilities and Basic Materials sectors again featuring in the top 3 with 43 and 26 errors respectively. However, 14 companies in the Industrial sector accounted for 87 errors, making them top this list.

Conclusion

This article is meant to provide the reader with a birds-eye view of the ESEF filing landscape in the EU and the UK and how the quality of these reports has been. Since the mandate is new, it is natural to see many errors and warnings in the reports that have been submitted to the OAMs so far. However, we expect these to reduce substantially in the following years when companies become more comfortable with the regulatory reporting requirements laid down by ESMA.

In a subsequent feature, we will take a deep dive into what kinds of errors and warnings were found in the reports we surveyed and how companies can avoid these in the future.

Looking for ESEF iXBRL filing software?

ESEF iXBRL Filings 2020 – A Fin-X Solutions Study

ESEF iXBRL Filings 2020 – A Fin-X Solutions Study ESEF iXBRL, ESEF iXBRL filings, iXBRL filings, ESEF, iXBRL, XBRL

ESEF iXBRL, ESEF iXBRL filings, iXBRL filings, ESEF, iXBRL, XBRL


IFPR Reporting Mandate UK

IFPR Reporting Mandate UK – A Q&A article| Fin-X Solutions

IFPR Reporting Mandate UK

IFPR reporting mandate: What it is

The UK Investment Firm Prudential Regime (IFPR) is a reporting obligation applying to all UK MiFID II Investment Firms. It is set to come into force from the 1st of January 2022. While the final contours of the IFPR regulation are still being finalized — with the Financial Conduct Authority (FCA) just having published its third consultation on the matter — it is evident that investment firms’ reporting obligations will differ based on their prudential category.

Why is the IFPR reporting mandate being introduced?

Simplifying and streamlining the prudential requirements of MiFID investment firms that are regulated in the UK by the FCA is the main goal of this regime. It wants to refocus expectations and prudential requirements away from the risks firms face, towards the potential harm they can pose to the markets and consumers.

Who will be affected by the IFPR?

The IFPR is applicable to:

  • Collective Portfolio Management Investment Firms (CPMIs)
  • MiFID investment firms authorised and regulated by the FCA, and
  • Regulated and unregulated holding companies that contain either of the above

It will not apply to investment firms designated by the Prudential Regulation Authority (PRA). They will continue to remain under the prudential supervision of the PRA.

What does this mean for affected entities?

The IFPR is analogous to the Investment Firms Regulation (IFR) and Investment Firms Directive (IFD) prudential regime that is applicable to EU MiFID firms from the 26th of June 2021. As its enforcement date is set after the EU Exit transition period, UK MiFID firms will comply with the UK-specific prudential regime, IFPR.

What does the future hold?

To develop the IFPR, the FCA is expected to assess responses from the European Banking Authority’s (EBA) Implementing Technical Standards and the industry to its consultation paper, among others.

While MiFID firms in the UK have less than a year to get ready, they can start by recognizing potential impacts this new regime is going to have on their business. This process can be eased to a great extent as there is already a lot of documentation available on the IFD/IFR.

How can firms prepare for this regime?

With a targeted implementation date of 1st Jan 2022, FCA regulated investment firms can follow a few simple steps to get ready for this regime:

  • Determining prudential category
  • Identifying relevant requirements based on the above classification
  • Performing an impact assessment
  • Designing and implementing an action plan

How we can help you

Under the IFD/IFR regime, investment firms in the EU are required to submit reports in the XBRL format. The UK FCA may bring in the XBRL requirement too.

With our extensive experience providing XBRL solutions in the UK — for HMRC, FCA-ESEF reporting requirements — we can assist you with IFPR reporting. If you are a qualifying firm under MiFID II, our SaaS solution can —

  • Integrate with an automated reporting framework
  • Facilitate auto data extraction and XBRL instance generation
  • Provide modularity to incorporate future changes in business rules or taxonomies

For a hassle-free IFPR compliance with IRIS iDEAL®, get in touch.

IFPR Reporting Mandate UK – A Q&A article| Fin-X Solutions

UKSEF, ESEF, UKSEF taxonomy, ESEF taxonomy

UKSEF, ESEF, UKSEF taxonomy, ESEF taxonomy


Avoid Running Into Style Issues With Your FCA iXBRL Filings

Avoid Running Into Style Issues With Your FCA iXBRL Filings

Must your FCA iXBRL compliance lead you to a compromise on how your annual report in the xHTML format appears in comparison to the highly attractive PDF document you’ve been presenting all these years? Not really.

However, in our close monitoring of a good number of early iXBRL filings this year, we were surprising to see that in several cases the xHTML versions of annual reports reflect none of the style elements of their well-designed PDF counterparts.

For many years now, companies have been publishing annual reports that are highly stylized and aesthetically pleasing. This is because annual reports serve two purposes. They are both a legal document for regulatory compliance purposes as well as a document that investors and analysts use to track companies’ financials and strategy. The appearance of a document counts to a greater extent when it is used by investors and analysts.

While helping companies prepare documents that comply with the ESEF mandate, several compliance solutions have not been able to effectively retain the stylized elements of a PDF annual report within an xHTML document.

Here’s an example that shows how strikingly different both versions look. In this PDF version of a company’s annual report, you can see that the graphs are attractively designed and placed.

Screenshot of a company’s PDF annual report

FCA iXBRL

However, in the xHTML version of the very same company’s annual report, you would notice that the graphs appear as though they have been stretched horizontally. Some extra graphs and text have also been introduced.

xHTML version of the same company’s annual report

FCA iXBRL

xHTML reports that have design elements missing run aground on two fronts.

Auditors’ dilemma about signing off on documents without the usual design elements

It is the duty of an auditor to provide an opinion about an annual report. In countries where ESEF filings need to be audited, it becomes hard for auditors to provide an opinion when the xHTML file looks completely different from the stylized PDF file. What do the auditors sign off on? Is it on an unattractive xHTML document or an enticing PDF?

An unattractive annual report can put off investors and analysts

When an annual report is unsightly, it may not garner as much attention from investors and analysts as the company desires. The whole idea behind the FCA iXBRL format is to increase the accessibility and comparability of annual reports. An xHTML report that falls short in the aesthetics department defeats that purpose.

To conclude

Running into glitches during a first-time FCA iXBRL filing might be expected. However, issues stemming from a software’s incapability to effectively introduce style elements into an xHTML document are avoidable.

While preparing FCA iXBRL filings, companies must expect a lot more from your compliance software than a mere capability for XBRL tagging.

E-mail us your PDF annual report at  contact@fin-xsolutions.com. We would be happy to show you how your filing would look in xHTML.

FCA iXBRL, iXBRL Filing, xHTML

FCA iXBRL, iXBRL Filing, xHTML