HMRC Extend Scope of ‘Senior Accounting Officer’ Tax Systems Sign-off Rules, Says KPMG
Following a consultation period, HMRC has published its revised guidance on Senior Accounting Officer (SAO) regulations, which require a senior individual within UK taxpaying corporates to take personal responsibility for the company’s tax systems and processes.
And according to KPMG in the UK, there are significant changes in HMRC’s position in several areas. The “light touch” approach applied during the first year of the regulations will cease for companies already within the scope of the rules.
Banks and insurance companies who were previously exempt from the turnover test will now be within scope. Overseas activities of UK companies are now included within the purview of the regulations
Confirmation that SAO rules will apply where insolvency procedures are underway.
The end of “light touch”
KPMG understands that HMRC considers the ‘light touch’ approach, applied to year one of the SAO regulations, as a ‘once-only’ concession and this has not been included in the revised guidance.
However, where companies first enter the SAO regime by virtue of the revised guidance (and not simply because they newly qualify under the existing turnover and balance sheet tests) HMRC have confirmed that a similar ‘light touch’ approach will be applied to the first year after issuance of the revised guidance.
In response to these changes, KPMG has developed an assessment tool, the SAO Diamond, which provides a snapshot of a company’s existing framework and highlights areas for of concern for year two and beyond.
The Diamond also provides benchmarking data against other organisations and may be a useful insight for companies in assessing their readiness for the tougher regime.
Stephen Callahan, Head of Tax Risk and Governance at KPMG in the UK, comments: “A key concern for many SAOs is the lack of personal oversight over existing tax accounting arrangements and whether the existing control and monitoring framework is sufficient given the demands of the SAO requirements.”
According to KPMG, HMRC have been known to contact SAOs directly to ask for details of what evidence there was for their sign off. An annual assurance is unlikely to be sufficient, in KPMG’s view.
Stephen Callahan concluded: “The SAO requirements call for regular and frequent monitoring over the appropriateness of all tax accounting arrangements. With the confirmation that the ‘light-touch’ period is now over, SAOs will have to ensure that the accounting arrangements are being monitored on an ongoing, ‘real time’ basis and that all significant tax risks have been identified and are being appropriately controlled”