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An overview of the Proposed Senior Accounting Officers Obligations

Draft legislation in the recent 2009 Finance Bill sets out the details as to how the surprise new proposals relating to “Senior Accounting Officers” (“SAO”) of large companies will work. This note summarises the new obligations and suggests how businesses should respond to them.

The legislation defines a SAO “as the director or officer of the company who has overall responsibility for the company’s financial accounting arrangements”. The new obligations and penalties are as set out below:

Senior Accounting Officers Companies

Tax Accounting Arrangement Obligations

  • Are required to take reasonable steps to ensure that the company and any subsidiaries establish and maintain appropriate tax accounting arrangements. which enable the liability to taxes/duties to be calculated accurately; (“Appropriate tax accounting arrangements” are defined as “accounting arrangements that enable the liability to taxes and duties of the company and its subsidiaries (if any) to be calculated accurately);
  • Monitor and identify areas where the accounting arrangements are not appropriate.
 None proposed
Reporting Obligations
  • Notify the company’s auditors before the accounts are signed if at any time in the financial year the company or any of its subsidiaries did not have adequate tax accounting arrangements in place before and provide an explanation of the inadequacies.
  • The SAO is also required to provide HM Revenue and Customs (HMRC) with a completed certificate for each financial year stating that either:
  • Appropriate tax accounting arrangements were in place throughout the whole financial year, or
  • Provide an explanation of the areas in which the accounting arrangements are not appropriate, and state whether an explanation has been provided to the company’s auditors.

Companies will be

required to notify HMRC

of each SAO at any time

during the financial year

by no later than the date of

accounts filing.

Penalties

Up to £5,000 for:

  • Failing to take reasonable steps to ensure appropriate tax accounting arrangements are in place;
  • Failing to provide an explanation to the auditors;
  • Failing to comply with the annual certification requirements; or
  • Providing a certificate that contains a careless or deliberate inaccuracy.

Up to £5,000 for the failure to notify HMRC of the identity of its SAOs.

Scope to reduce penalties? Penalties are subject to an appeal process. There is no liability to a penalty if SAOs/companies can offer a reasonable excuse for their non-compliance.

Recommended Action

These proposals will clearly concern SAOs given the prospect of personal fines. They will therefore want comfort from an objective reviewer that the company’s accounting systems and processes are robust enough to satisfy HMRC.

Our Tax Risk Management team have a thorough understanding of HMRC’s expectations of accounting systems and processes that deliver accurate tax returns and are actively engaged in the consultation process.

National contact

Jon Claypole

Director - Tax Investigations
+44 (0)20 7063 4323

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