e-Services Programme

1. e-Services Programme XBRL and Company Tax e-filing 21st May 2003 • Jeff Smith • Service Development Leader • Inland Revenue (UK) • CT e-services

2. Agenda • Background • UK Government approach to company regulation • e-business objectives • Summary of the project • The Company Tax Return • Phased approach • Timing - what and when • Business benefits-for customers & theInland Revenue • Approach to taxonomy development

3. UK Government aim for simplification & modernisation • Looking to simplify and reduce regulatory burden on companies • Company Law Reform • Simplification of tax rules • e-business has an important part to play

4. E-business objectives • “The government is committed to making the delivery of all its services available electronically by 2005” • “It is also committed to ensuring that the services it delivers should be responsive to users' needs, easy-to-use, flexible and efficient.” http://www.inlandrevenue.gov.uk/ir_strategy/intro.htm • e-filing of Company Tax Returns is part of this programme • we receive over 1,000,000 CT Returns each year • the vast majority are from small companies (only 10,000 public companies)

5. The Company Tax Return& the e-filing solution

6. Return form (CT600) Accounts Computations Need ALL three components to make up a valid return Complex information Difficult to put together Company Tax Return

7. Computations are complex • Accounts figure of profit adjusted for tax purposes • capital allowances • depreciation etc • Often 30 pages + • Free format • No standard layout • Currently paper documents • usually produced using specialised software • information inaccessible • no data flow to IR systems

8. Accounts are also paper based • We require full accounts including Profit & Loss • Again all held on paper with little data flow to IR systems • Limited information available for risk assessment and for Government financial planning • Companies required to submit accounts separately to other Government Departments

9. CT e-filing solution • Devised in collaboration with customers at a series of workshops • accountants are really the “customers” • some large companies have a direct relationshipwith us • Picking up on external drive for XBRL • Seen as a catalyst for business process change • prepared to reconsider our policy andlegislation • prepared to consider radical ideas - nothing out of bounds

10. CT eFiling - 3 parts - 3 phases Current A B C XML & XBRL CT Return XML CT600 CT600 form XML CT600 XBRL Comps Accounts Computations

11. - Service Development - Live service Indicative Phasing Plan 2002 2003 2004 2005 Phase Current Paper process Went live 13th March A. Finite Life-span B. C. Concurrent Development Later Phases??

12. CT eFiling progressPhase A - XML CT600 + attachments • Trial went live on 13th March 2003 • Controlled take up throughout 2003 • Aim to be proven and fully operational by end of 2003 • the most difficult part technically • provides infrastructure to build on XBRL phases • XBRL phases are relatively straightforward enhancements • real challenge is maximising potential for business process change

13. CT eFiling Progress Phase B - XBRL for computations • Working in collaboration with: • KPMG, PwC, Deloitte & Touche, ICAEW plus third party CT software suppliers and XBRL technical support • Draft CT computation “taxonomy” published • CT computation is output from third party software products • On target for October 2003 start • IR founder members of XBRL UK jurisdiction • vital source of information and support

14. Next Steps Phase C - XBRL wider impact Scope recently reaffirmed by customers, now discussing implications for: • compliance work (how IR make enquiries) • IR/agents joint business processes • incentives and customer benefits - to drive take-up • Working with XBRL UK to demonstrate the business case for XBRL adoption across financial community • Will use UK GAAP taxonomy for eFiled accounts • Working with accounting software suppliers - integrate XBRL into their products?

15. Next Steps Longer term - beyond Phase C? • Considering implications for small company reporting • interaction with Company Law Reform • standard chart of accounts for very small companies? • Even more radical joint process change? • Drill down to underlying data? Sharing risk rules? • Real time enquiries? • Shorter enquiry window? • Single filing of accounts for all Government purposes?

16. Business Benefits based on CT eFiling usingXBRL

17. XBRL e-filing Business BenefitsImmediate & longer term

18. XBRL e-filing Business BenefitsImmediate & longer term

19. Wider use acrossGovernment

20. Wider use across Government • IR is probably in the lead for UK Government Departments on XBRL development • but work is co-ordinated by the Office of the eEnvoy • have recommended XBRL for use by Government Departments • Companies House the most obvious read across from accounts filing, but interest from: • Office for National Statistics • Financial Services Authority • Customs & Excise

21. Approach to taxonomy development

22. Taxonomy development The problem: • Computation is essentially free-format with no standard content • taxonomy must support total flexibility • must not constrain the information that customers want to provide and the way in which they lay out the information The solution: • So far XBRL has met the requirements for flexibility without imposing constraints

23. Taxonomy development • Started with a simple taxonomy derived from real examples of computations • first draft had 350 lines (just using Excel) • then transformed first in XML and later XBRL • Workshops with customers to validate and to add layers of detail • cycle repeated 8 times - now have 3,700 “lines” • All output available (on Yahoo Group) for customers and software suppliers • Taxonomy files, Linkbases, Stylesheets, • “Tree” representation for easier review by humans! Done by IR Inspectors XML/XBRL specialist skills required

24. Questions? Jeff Smith Service Development Leader CT e-Services Jeff.Smith@ir.gsi.gov.uk