Why XBRL Tagging Is Crucial for Corporate Transparency: Insights from TISCreport

The UK Government’s Corporate Transparency and Register Reform White Paper (2022) and the subsequent Economic Crime and Corporate Transparency Act 2023 have set the stage for transformative reforms at Companies House. Central to these changes is the mandatory adoption of iXBRL (Inline Extensible Business Reporting Language) for financial reporting, expected to become compulsory by Q1 2025. These developments promise to modernise corporate reporting, combat economic crime, and enhance transparency. However, as TISCreport’s experience with voluntarily shared iXBRL data reveals, the quality of tagging is critical to realising the full potential of these reforms.

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Companies House Reforms: A Bold Step for Transparency

The move towards mandatory iXBRL tagging reflects the UK’s commitment to aligning with international best practices. It’s a critical component of the government’s strategy to improve financial reporting, strengthen corporate accountability, and reduce opportunities for economic crime.

As Secretary of State Kwasi Kwarteng stated in the 2022 White Paper:

“In line with international best practice, we will require company accounts to be filed with Companies House in a digital format using the industry standard Inline Extensible Business Reporting Language (iXBRL). We will also require the information to be fully tagged. These tags are machine readable, making the information easier to interrogate, compare and check.”

This transformative approach will create a “more informative, responsive and reliable companies register,” providing immense value to businesses, investors, and regulators.

Current Challenges: The Variability of Voluntarily Shared Data

At TISCreport, we have been processing voluntarily submitted iXBRL data from Companies House for years. While some companies provide well-tagged accounts with actionable financial metrics, the quality of tagging varies significantly.

• Sparse or Incomplete Tagging: Many submissions lack the critical information needed to assess compliance with financial thresholds, such as turnover or employee numbers.
• Regulatory Gaps: In the worst cases, the data is so minimal that it’s impossible to determine which regulations apply to a company based on financial criteria.

These inconsistencies hinder the utility of iXBRL as a tool for transparency, underscoring the urgent need for mandatory, comprehensive tagging standards.

The Economic Crime and Corporate Transparency Act 2023

The Economic Crime and Corporate Transparency Act 2023, which received Royal Assent in October, expands upon the government’s transparency agenda. It strengthens Companies House’s role, enhances financial disclosures, and provides the tools needed to tackle economic crime.

Key Highlights Relevant to iXBRL

• Mandatory iXBRL Submissions: The Act mandates improvements to financial information, including digital submissions in iXBRL format. This ensures data is reliable, complete, and easier to interrogate.
• Registrar’s Powers: Companies House gains new authority to query and reject filings that are incomplete, inconsistent, or inaccurate.
• Updated Financial Statements: Changes for small and micro entities aim to improve the accuracy and comparability of financial data.
• Cross-Agency Collaboration: Companies House will share data with law enforcement agencies and use data-matching techniques to identify discrepancies.

Together, these reforms will address the shortcomings of voluntarily shared iXBRL data, ensuring consistency and improving data quality across the board.

The Role of iXBRL in 2025

By Q1 2025, the adoption of mandatory iXBRL tagging will bring significant benefits:

• Consistency: All companies will follow the same tagging standards, eliminating variability.
• Actionable Insights: Comprehensive tagging will enable robust analyses of corporate compliance and transparency.
• Reliability: Machine-readable data will reduce errors and enhance business intelligence.

For TISCreport, these improvements represent a pivotal opportunity. Access to richer and more consistent data will allow us to:

• Accurately Evaluate Regulatory Applicability: Determine thresholds for financial compliance with precision.
• Enhance Transparency Scoring: Reward companies that go beyond compliance and fully embrace meaningful tagging.
• Strengthen ESG and Supply Chain Tools: Use reliable financial data to deepen insights into sustainability and ethical practices.

Aligning TISCreport’s Scores with Reform Goals

Currently, TISCreport’s Transparency Score rewards companies that voluntarily submit iXBRL-tagged accounts. However, with mandatory iXBRL submissions on the horizon, we will update our scoring framework to incentivise:

1. Comprehensive Tagging: Recognising companies that tag critical metrics such as turnover, employee numbers, and balance sheet totals.
2. Quality and Completeness: Penalising tokenistic or incomplete tagging that fails to deliver actionable transparency.
3. Leadership in Reporting: Highlighting organisations that set a high standard for iXBRL compliance and accountability.

Beyond Transparency: Shaping the Future of Data

Mandatory iXBRL tagging also disrupts traditional methods of data extraction. Historically, many business intelligence companies have relied on manual data entry to process financial information. This often raises ethical concerns about the working conditions of data operatives.

The transition to iXBRL will:

• Automate Data Extraction: Machines will handle repetitive tasks, reducing dependency on human labour for data processing.
• Enhance Accuracy and Consistency: Standardised tagging ensures reliable and comparable data.
• Support AI-Driven Insights: Machine-readable data will improve the quality of AI training datasets, enabling smarter business intelligence.

In a world where AI remains heavily reliant on human-generated content, the adoption of iXBRL represents a critical step towards standardisation and efficiency.

Preparing for the Transition

The move to iXBRL reporting, combined with a reduced 9-month filing window, requires businesses to:

• Invest in Technology: Adopt advanced tools for accurate and efficient tagging.
• Upskill Staff: Train employees to meet the new standards.
• Plan Ahead: Adjust workflows to avoid last-minute compliance challenges.

Conclusion

The adoption of mandatory iXBRL tagging and the broader reforms under the Economic Crime and Corporate Transparency Act 2023 mark a turning point for UK corporate reporting. By addressing the current variability in data quality and ensuring consistent, comprehensive tagging, these changes will strengthen transparency, improve accountability, and modernise financial reporting.

At TISCreport, we are ready to support businesses in navigating this transition. By adapting our tools and scoring frameworks, we aim to champion transparency that goes beyond compliance—delivering trust, accountability, and meaningful insights for all stakeholders.