Following the “light touch” approach to the first year’s certificates, SAOs should now be able to demonstrate that tax risks are properly understood, controlled and managed. HMRC’s revised guidance on SAO is expected to be published shortly and many organisations are now gearing up for submitting their second SAO certificate(s). In light of these and other recent developments we will be hosting an SAO WebEx on Thursday 26 April 2012 to cover the following:
- Key emerging differences following the initial ‘light touch’ year
- Latest findings and experiences of clients (e.g. the certification process and challenges from HMRC)
- Disclosing deficiencies after having previously submitted clean year 1 certificate(s)
- What are HMRC’s expectations?
- How should a business manage its SAO obligations – what does ‘good’ look like?
- KPMG’s “SAO Diamond” Benchmarking Survey
If you are interested in attending this event please email saotaxdiary@kpmg.co.uk for further details.
17/04/2012
HMRC has recently announced a governance protocol over communication and escalation procedures where it has concerns over a Bank’s compliance with its commitments under the existing Code of Practice on Taxation for Banks.
Such escalation procedures include:
- Compliance issues being raised at the earliest opportunity with the Bank where HMRC have identified significant concerns
- Where such concerns cannot be resolved by the CRM, issues will be escalated to the Bank’s Board for further discussion
- If the Bank is ultimately deemed to be non compliant, HMRC would expect the Bank to acknowledge this fact in public announcements it makes on the operation of the Code
HMRC have indicated their expectations under the Code in three main areas: “Governance”, “Tax Planning” and the “Relationship between the Bank and HMRC”. Under each heading, HMRC outline a number of reasons as to why concerns could be raised, ranging from a lack of a formal governance and risk management framework; a lack of transparency in tax planning and in dealings with HMRC; through to a failure to provide an SAO certificate under schedule 46 FA 2009.
The protocol is aligned with HMRC’s objectives for SAO and is indicative of an increasing trend at HMRC to ensure that governance processes around tax are dealt with at Board level. The further expectation of a public disclosure, for non compliance with the Code, also adds to the reputational risk for a Bank and reinforces the requirement of maintaining a level of transparency in all its tax affairs.
A full copy of the protocol can be viewed by following the link below:
HMRC Governance Protocol on compliance with the Code of Practice on Taxation for Banks (PDF 56KB)
29/03/2012
Lately we have started to see a number of instances where SAOs have subsequently identified weaknesses in their tax accounting arrangements that were not previously identified in the certificates they had submitted to HMRC. These weaknesses have stemmed from a variety of reasons including inadequate change management protocols (e.g. ensuring the correct tax treatment for new contracts); a lack of a robust risk identification process in ‘Year 1’; and insufficient monitoring over tax planning schemes.
These past certificates are therefore inaccurate in light of these newly identified weaknesses. An inaccuracy in a certificate that was neither careless nor deliberate when the certificate was given, could be treated as careless by HRMC (and the SAO liable to a penalty), if it can be shown that the SAO discovered the inaccuracy and did not take reasonable steps to inform HMRC. We recommend that the SAO fully understands the underlying reason for the error and that alongside the corrected certificate, there is a considered process regarding the way that it is communicated to HMRC.
SAOs, therefore, need to be mindful of their obligations throughout the accounting period and to consider whether the breakdown relates to past as well as current accounting periods. If the former, action may be needed in respect of correcting past SAO certificates. It is not simply sufficient for SAOs to focus on their obligations in the few weeks leading up to the submission of their next certificate.
29/03/2012
A number of the budget measures announced last week will have a direct impact on the calculation of tax liabilities covered in the Senior Accounting Officer legislation. Therefore, SAOs should ensure their accounting arrangements have the capacity to monitor and adapt to the changing tax environment.
Although there was no specific reference to the Senior Accounting Officer legislation, we believe the revised guidance on SAO is due to be released around the second week of April.
Full KPMG Commentary on the 2012 Budget, and what it means for you, can be found here.
15/03/2012
KPMG recently met with HMRC’s SAO Policy Team. During the meeting it emerged that HMRC will be providing Customer Relationship Managers (“CRMs”) with additional SAO training which should be completed before the end of May.
The training will be in order to roll out the revised guidance on the SAO Regulations that will likely be published during the second week of April.
The training should help to address some of the variations in approach that we have seen across the CRM population and we hope that, going forward, SAOs will experience greater consistency in the approach the CRMs take.
In response to the increasing level of direct SAO engagement by CRMs, KPMG recommends that SAOs fully prepare in advance of these meetings so that they are fully equipped to respond to such questions.
05/03/2012
What happens when there is a change in SAO either during the accounting period,or after the accounting period but prior to the filing of the SAO certificate?
The outgoing SAO may be liable to a penalty even after leaving the position and the incoming SAO may be reluctant to certify for the period in which they were not the SAO!
A formal and robust change management procedure should, therefore, be adopted as outlined by the company’s overall tax governance framework, with the specific course action being determined by the timing of the hand over.
14/02/2012
COSO*, a recognised thought leader in the areas of risk and control, has recently released a proposed update to their “Internal Control - Integrated Framework” publication.
The framework is one of the most widely used for designing and evaluating systems of internal control.
This enhanced framework has been updated to address the fact that businesses have become increasingly global, complex and technology driven. There is greater engagement by investors and increased scrutiny from regulators seeking higher levels of transparency and accountability for the integrity of the internal control systems that support organisations’ operations, governance, and external communications.
As such, this is a useful reference tool for any SAO seeking to obtain comfort over the adequacy of their own internal control environment and the mechanisms available to them. HMRC is also increasingly making reference to it in discussions with us on SAO.
The KPMG briefing sheet can be viewed by following the link below:
(*) “Committee of Sponsoring Organizations of the Treadway Commission”
03/02/2012
Following a consultation period, HMRC have indicated that its revised guidance on Senior Accounting Officer regulations will be published on or before 1 April 2012.
There are significant changes in HMRC’s position in the following areas:
- 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
It is important to emphasise that the ‘light touch’ approach to year one is considered as a ‘once-only’ concession by HMRC and will not be included in the revised SAO guidance. However, where companies newly 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 now exiting the ‘light touch’ year, the revised HMRC guidelines will invariably place a greater deal scrutiny on how companies are ensuring their SAO obligations are being met.
27/01/2012
KPMG has launched the SAO Diamond, an assessment tool designed to provide SAOs with a high level overview of the current state of their existing tax framework.
The tool will provide an initial assessment of key issues surrounding governance and tax accounting arrangements and is intended to prepare companies and their SAO(s) for more detailed enquiries from HMRC.
In addition to highlighting a roadmap on SAO compliance, we anticipate the Diamond to provide an insightful benchmark against peers which will facilitate discussion with internal stakeholders on the wider concept of tax risk and governance.
