- HMRC extending scope of “Senior Accounting Officer” rules to banks and insurance companies
- HMRC ceasing its “light touch” approach applied during initial phase
- In response to this increased scrutiny and scope, KPMG launches “SAO Diamond” - an assessment tool to benchmark companies’ performance
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 the following 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.
With most qualifying companies exiting the ‘light touch’ year, there are some common themes emerging in respect of HMRC expectations for ongoing compliance:
| Board Engagement |
Typically SAO compliance and CRM engagement was with Head of Tax |
Evidence of Board oversight and direct engagement by CRM with SAO |
| Risk Identification |
Establishment of tax risk identification process as a ‘one-off’ project |
Evidence of risk identification and assessment throughout the year with weaknesses/failures challenged by CRM |
| Monitoring |
Little monitoring and generally minimal challenge by CRMs |
Evidence of routine monitoring and established tolerance levels for errors |
| Certification |
General expectation by HMRC that qualified certificates will be relatively common |
Increased scrutiny over clean certificates especially when companies are categorised as non-low risk by HMRC |
SAO Diamond
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”
For regular insights, updates and opinions on all matters concerning SAO Regulations please read the SAO Tax Diary.
-Ends-
For further information please contact:
Margot Cowhig, KPMG Corporate Communications
Tel: 0207 694 4246 Mobile: 07920 274856: margot.cowhig@kpmg.co.uk
Follow us on Twitter: @KPMG_UK_LLP
KPMG Press Office: 0207 694 8773
About KPMG:
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff. The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 152 countries and have 145,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.
