47 – 49 Pearse Street, Dublin 2

Mr Brian Boyle

Principal Officer

Large Cases Division

Setanta Centre

Dublin 2.

19 April 2012

Dear Brian

iXBRL Consultation

We refer to your recent Consultation Document on the proposed implementation of electronic filing of Financial Statements and Tax computations with Revenue using iXBRL, and to various subsequent meetings and discussions in relation to the matter. Without prejudice to any future discussions we might have on the issue, we would like to raise the following points, listed following the pattern of your Consultation Document.

Background

The E filing initiatives introduced by Revenue over the last 10 years have been characterised by useful consultations between Revenue and Tax agents towards improving the system, and by a general willingness by Tax Agents to adopt the new methods of working. Studies such as the 2010 OECD Survey, Survey of Trends and Developments in the Use of Electronic Services for Taxpayer Service Delivery, show that by any measure of compliance or payment activity, Ireland has made considerably more progress in the area than many other OECD territories.

We suggest that a key reason for this progress has been a careful approach by Revenue to imposing mandatory electronic filing and payment techniques. Any new procedure or process needs time to operate in a real-time environment so that issues and problems can be identified and resolved. Where a process becomes mandatory too soon, or where insufficient alternative options remain available, the teething problems associated with the new procedures cannot be properly resolved. A possible illustration of this was the manner of introduction of the E stamping regime.

Your document cites the Commission on Taxation recommendation 5.42 by way of justification for the current initiative. We feel that Recommendation 5.42 (which dates back to September 2009) has already been met.

Electronic Filing of Financial Statements and Tax Computations

We are unclear as to the approach which Revenue is proposing as described in this section. Under existing ROS arrangements, the computations for Income Tax or Corporation Tax are not filed as such. Instead the taxpayer provides the relevant figures, in the course of completing the Form 11 or CT1, from which ROS carries out the computation. As a consequence, the description furnished in your consultation paper is at odds with the arrangements proposed in Finance Act 2012 in relation to self-assessment for 2013 onwards.

What is XBRL?

We have had sight of the letter of 5 March 2012 to you from our colleagues in Business Reporting Ireland Ltd, and concur with their assessment of XBRL.

What is iXBRL and Why Has Revenue Chosen this Option?

We note your references to the procedures adopted by your UK colleagues in HM Revenue and Customs. Even though mandatory use of iXBRL has existed in the UK since April 2011, this does not mean the process has been without its problems. Can we direct you to the HMRC publication Digital by Default, issued on 29 February 2012. Inter alia, this summarises observations received in relation to the iXBRL filing of accounts (at question 5). The points made, as reported by HMRC, include:

• “The introduction of XBRL tagging in Company Tax Returns has been a new challenge for HMRC, companies, their advisers and software suppliers. Much has been achieved already but everyone is still learning and improving.”
• “HMRC has received many representations outside of this consultation about the nature of the ideal accounts tagging requirement, what standards are expected in meeting it, and the costs involved. HMRC will be responding in a variety of ways, particularly in promoting a clearer understanding of the standards expected. And HMRC is working with software suppliers to help them improve their products.”
• “HMRC agrees the need to improve the consistency of the requirements for tagging profit and loss account items between the accounts and the tax computations, and has already started that work with the possibility of making an improvement in October 2013. Any resulting change will be preceded by appropriate consultations.”

Such findings might be acceptable for an optional regime, where it could be acknowledged that everyone was on learning curve towards perfecting a system. But these findings arise after 18 months of a mandatory regime. With no disrespect to the HMRC process, these very recent findings suggest that it may not be a paradigm approach for the Irish Revenue to follow.

Initial Optional/Mandatory Filing of Financial Statements

The consultation document suggests that only a very limited period of optional filing using iXBRL is contemplated. At best, this optional filing period would run from the end of 2012 to September 2013. This is a very short period to provide what would be for many taxpayers a “trial opportunity”, without falling foul of sanctions where the more traditional methods could be applied in case of difficulty. Furthermore, if the period in question relates to when the due date for filing falls, rather than the year-end date, relatively few taxpayers will be in a position to be ready to file using iXBRL within this interval.

General Observations

• This timeline, as set out in more detail on here of your Consultation Document, is in our view too ambitious. It is not a trivial task to move to iXBRL compatible accounts presentation. From the point of view of firms of accountants acting as agents, the task becomes more complex where:
  • The clients affairs are of a level of complexity unsuited to standard accounts preparation packages, or,
  • The client prepares their own accounts for submission to Revenue (while the agent completes the return on the client's behalf), or
  • A different agent prepares the accounts, and sends them to the tax agent for onward transmission to Revenue.
• From discussions we have had with tax agents in Northern Ireland, who are already dealing with the HMRC mandatory iXBRL regime, it seems that the accounts preparation challenge, ironically, is easier when dealing with the affairs of smaller corporate taxpayers. Such taxpayers are more likely to use industry standard accounts preparation software without particular tailoring or modification, and also are less likely either to submit their own accounts directly, or engage multiple agents. The Revenue proposal to address LCD cases first, while understandable from Revenue's risk management perspective, may not be the best way to systematically introduce iXBRL compliance.
• For large taxpayers, the UK experience has been characterised by accounts needing to undergo a manual tagging process to make them iXBRL compliant. Not only has this increased compliance costs, but it has increased the time taken to submit accounts and returns to HMRC. The risk management benefits attaching to the iXBRL project for Revenue need to be balanced against inevitable delays in the submission of computations and returns during the first few years of operation. From discussions with firms in Northern Ireland, there is some evidence which suggests that in the UK, in the initial period of operation, perfectly good returns from the tax technical and compliance point of view were rejected because of relatively minor iXBRL tagging errors. Ultimately this impacts on compliance statistics and tax receipts.
• Aside from the care taken in making elements of electronic filing mandatory, as already cited, another reason the ROS project has been successful (and favourably comparable with attempts by other Revenue Authorities) was that Revenue took responsibility for the development and provision of the end user filing software. A taxpayer wishing to file electronically only had to register with ROS. It is not clear to us from the Consultation Document that Revenue are adopting the same approach in relation to the iXBRL project.
• We would ask that Revenue be mindful of the increased compliance costs associated with a transition to iXBRL. Just as Revenue are finding it more difficult to collect tax due because of the recession, there is pressure on compliance fees. Over 80% of all Self-Assessment returns are agent assisted to some degree. Tax agents will need to balance the service they can provide with the Return on Investment from the cost of moving to iXBRL.
• There can be no doubt that over time, industry will migrate to XBRL in its various forms and associated taxonomies in the production of accounts data, as it would make commercial sense to do so. The recession has undoubtedly impacted on the pace of migration. It is by no means clear to us, for the reasons outlined above, that the mandatory use of iXBRL by a significant category of taxpayers too soon within the migration cycle will further Revenue's interests or the interests of compliant taxpayers.
• iXBRL turns the statutory accounts (verbatim) into computer readable code, in line with the defined taxonomy. Unlike the accounts menu process widely in use in the past, it does not provide any additional detail or analysis specifically relevant to taxation. We are unclear therefore as to the added value from a Revenue perspective in comparison with the accounts menu procedure. Perhaps there is scope for identifying ways to improve the accounts menu approach, possibly based on iXBRL concepts?
• We strongly urge that the timeline for this project, as described on here of your Consultation Document, be revisited. Specifically:
• it seems to us that iXBRL as an option is being removed too soon in the cycle, and that it should not be mandatory in any form until October 2014
• Making the use of iXBRL mandatory for all LCD cases is too blunt an instrument in the downturn. We suggest at least that LCD cases be subdivided, perhaps by reference to Revenue risk assessment, in the earlier years. In this way, the pattern established with the making mandatory of return filing by ROS in recent years will be mirrored.
• We endorse the point made by Business Reporting Ireland Limited that iXBRL might not be appropriate for some types of company irrespective of where their accounts are filed. These would include dormant companies, or companies subject to the provisions of TCA97 section 110 (securitisation).
• Lastly, we feel it is premature for there to be any discussion of tax computation rollout. A separate discussion on this rollout may be required, with reference to the provisions of Finance Act 2012 and their implementation during 2013.

We hope these observations are helpful in the context of the consultation, and would be happy to engage in further correspondence and discussion with you as required. Please contact Brian Keegan at Chartered Accountants Ireland in the first instance who will deal with any comments or further requests you might have.

Yours sincerely

Liam Lynch

Chairman, CCAB I Tax Committee

eRegistration Enhancements eRegistration

eRegistration went live on 29^th November 2010 with the introduction of a range of eRegistration services including’

Registering a new business for,

• Income Tax
• Corporation Tax
• Employers PAYE/PRSI (PREM)
• Value Added Tax
• Relevant Contracts Tax
• ELevy

In addition, the services allowed existing business to register for any of the above taxes as well as a cancellation service for any of the above taxes.

The service allowed an existing ROS user, agent or individual to manage their agent/client “links”.

On 28^th March 2011, the services were expanded to include re-registration of IT/CT/PREM and eLevy as well as registration for new Partnerships and new Trusts.

Enhancements in July 2012

A series of enhancements will be released in early July 2012 to include the following,

Failure notifications

Where an eRegistration application fails, the user will be notified after they have signed and submitted that the application has failed and the reason for the unsuccessful application.

The failure will be notified on the acknowledgement screen immediately displayed following submission and in the users ROS inbox.

Agent links – Single attachment letter for multiple taxes

Where an agent is registering a number of taxes for a client or linking to a new client for multiple taxes, a single agent link notification will be available rather than attaching a separate notification for each tax involved.

Corporation Tax registration

Currently, when a company is being registered under eRegistration, the company has to be registered for Corporation Tax first before any additional taxes can be registered for the company. After July, it will be possible to complete all tax registrations for a new company in the same transaction.

eCancellations

From July, when a registration is cancelled in eRegistration, the user will be presented with a number of additional fields for completion including,

• How assets and equipment have been disposed of
• Position with business premises

For sole traders and Partnerships,

• Current means of live

For companies,

• Current business involvement of each Director

These fields will not be mandatory.

eCancellation for RCT – Warning message

Where an RCT registration is being cancelled under eRegistration, the user will be warned that the activity will cancel the RCT registration and if a change of status is only required i.e. Principal contractor to sub-contractor, to contact their local tax district.

Non Assessable spouse/Civil Partner

It will be possible to register a non assessable spouse as a director of a company or as a partner in a partnership after the July enhancement release.

Summary screen

Prior to signing and submitting, a summary screen will be presented to the user with a printable summary of all requests.

NACE code description

On eRegistration inbox documents and summary screens, where NACE codes are displayed, the equivalent description of the codes will also be displayed.

Additional Fields

“Expected turnover” field will be provided for Income tax and VAT registrations. An additional “reason for registration” filed will also be included for VAT registrations applications, “Is business only registered for receipt of services from abroad and to self account for VAT”

Tutorial video's

The series of tutorial videos available through the Revenue web site will be updated to take account of the latest enhancements.

April 2012

Source: Revenue Commissioners. www.revenue.ie.

Copyright Acknowledged.