The last budget included a surprising announcement which has subsequently left many corporate executives twitching awkwardly in their leather-trimmed seats.
In response to a perceived deficiency, the government announced that senior accounting officers of large companies would be required to personally certify that their company’s accounting systems were adequate for the purposes of accurate tax reporting.
As a result, a company falling within the new rules for a financial year, must notify HMRC of the name of its senior accounting officer (“SAO”), being the director or officer of the company who has overall responsibility for the company’s financial accounting arrangements, for that financial year.
The main duty of the SAO will be to take reasonable steps to:
- Ensure the company establishes and maintains appropriate tax accounting arrangements;
- Monitor the accounting arrangements of the company;
- Identify any respects in which those arrangements are not appropriate.
- Provide HMRC with a certificate stating whether the company has appropriate tax accounting arrangements, or, provide an explanation where it does not.
Failure to comply with the main duties could result in a penalty of £5,000 assessable on the SAO. In addition, a further £5,000 penalty could be imposed on the SAO for failing to provide HMRC with a certificate.
There could also be a penalty where a company fails to notify HMRC of the name(s) of the person who was the SAO throughout the financial year.
According to the draft guidance issued by HMRC, the measures apply to UK registered companies or groups of UK companies who, in aggregate, have turnover of more than £200m or have gross assets of more than £2bn.
The taxes and duties covered include not only Corporation Tax, VAT, Customs and Excise Dutes and PAYE, but other operational taxes such as Insurance Premium Tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax and Petroleum Revenue Tax.
As expected, these measures have received a negative reaction from both the tax and financial communities. Compliance is likely to be time-consuming and expensive and require the involvement of departments outside the tax function.
However, given the breath of taxes covered, and the personal responsibility attached, it is vitally important that companies and senior executives get the right processes in place.
Given our experience in providing compliance advice in a range of taxes to a number of large companies, we at Action Tax Consulting Ltd are well placed to provide companies with guidance and assistance and have set up a dedicated cross-tax service to assist large companies in complying with their statutory obligations.
Please feel free to contact one our team to set up a no-obligation meeting to explore this further.
