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SAO Tax Diary 

KPMG's Senior Accounting Officer (SAO) team brings you regular insights, updates and opinions on all matters concerning SAO Regulations.


Hosted by Julie Hughff, Head of Tax Management Consulting, and Peter Honeywell, Head of Tax Governance for National Markets, we will be considering issues arising from implementing the legislation as well as providing suggestions on implementing SAO principles within a wider tax risk management framework.


SAO Tax Diary

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HMRC consultation on governance and compliance published



Last week the Government published a consultation document entitled ‘Improving Large Business Tax Compliance’ available here. This follows the release of the TNS BMRB Final Report: ‘Exploring Large Business Tax Strategy Behaviour’ available here.

This consultation was announced as part of the Summer Budget and follows on from the “Exploring Large Business Tax Strategy Behaviour” report, also released last week by HMRC, which considered the approaches adopted by large businesses to tax in general and the role of tax strategies.


The consultation proposes a package of measures intended to improve large business tax compliance, comprising:


  •  A requirement that large businesses should publish their tax strategies;
  • a voluntary Code of Practice defining the standards HMRC expects large businesses to meet in their relationship with HMRC;
  • the introduction of a ‘special measures’ regime to tackle businesses that persistently adopt highly aggressive behaviours, principally around tax planning.


You may have already received a letter or email from your CRM (which we understand is being sent to all companies that are dealt with by HMRC’s Large Business Directorate) outlining this.  Such emails include a sentence which says:-
"These new measures do not represent a fundamental shift for HMRC, but rather a strengthening of our existing strategy. They are specifically designed to discourage large businesses from pursuing aggressive tax planning arrangements, and to provide additional sanctions against the small minority of large businesses that persist in unacceptable behaviours.”
The proposed requirements present a number of challenges, not least to those UK companies with overseas parents who will be required to publish their tax strategy, but from an SAO perspective, there is a specific statement to the effect that the two regimes are separate, presumably because a decision to adopt a particular tax strategy has little bearing upon the robustness of the underlying tax accounting arrangements. However, the consultation proposes that the SAO turnover and balance sheet thresholds should be used in identifying companies that will be party to the additional requirements, and that ‘sanctions could be modelled along the lines of the current HMRC SAO regime’. It is not clear at this stage whether it is intended that these sanctions could include personal liabilities arising from any failures to comply but the proposed requirement that a named individual should have responsibility for owning and signing off the strategy suggests that this may well be the case.
It would appear, therefore, that the new requirements are intended to operate in parallel to the SAO regime, both being part of the organisation’s overall tax governance framework which is the responsibility of the Board. However, there are clearly areas of overlap, for example the inclusion of ‘risk management’ among the areas that might be included when articulating the tax strategy (para 2.28), and it is therefore essential that businesses are able to articulate a coherent tax risk and governance framework which satisfies all relevant requirements.
KPMG will be submitting representations as part of this consultation process and we would therefore be very interested in hearing your views.



Know Your Customer (KYC) Meetings



After a period of relatively limited activity, HM Revenue & Customs is in the process of carrying out Know Your Customer (KYC) meetings with larger employers, many of which will be in the Senior Accounting Officer regime. KYC meetings are an exercise designed to enable HMRC to find out more about the employment tax processes and controls within organisations, together with the employee reward strategies, and continues the risk based approach adopted under the SAO regime.  The introduction of these meetings follows HMRC’s agenda to employing several individuals who have previously worked in industry or an accounting practice, in order to “up skill” their compliance officers.


Although on the surface these meetings are designed to enable HMRC to gain further information on their 'customers', we know from our clients' experiences that there is a strong focus on the processes and controls in place, in terms of employment tax compliance. The approach and depth into which the meetings have gone has varied from one client to another, however, we are noticing that for those within the SAO regime, HMRC is asking questions around the validity of SAO processes and the level of internal checks to evidence these. 


This again highlights the need for organisations to be able to articulate the governance and control framework within which tax is managed, particularly in areas such as employment taxes, which often involve the interaction of different parts of the business. In view of the prevalence of KYC meetings, it is therefore recommended that reviews are carried out on any areas of uncertainty.


SAO regime and Diverted Profits Tax (‘DPT’



The Diverted Profits Tax came into effect from 1 April 2015 and the application of the legislation in practice is a developing area. We have received a number of questions from clients as to whether DPT is included within the Senior Accounting Officer (SAO) regime.


The SAO regime requires certain companies to have appropriate tax accounting arrangements to enable specific taxes to be calculated accurately in all material respects. The taxes included within the regime are listed in statute and include “corporation tax including any amount assessable or chargeable as if it were corporation tax”, plus a list of other taxes. 


DPT is not specifically on the list and the Finance Act does not amend the list to include it.


This means the SAO regime could only apply if DPT were assessable or chargeable as if it were corporation tax, which it isn’t. The legislation which charges DPT makes no reference to DPT being assessable or chargeable as if it were corporation tax.


Therefore, DPT does not fall within the SAO regime as currently written, meaning that SAO penalties should not be chargeable on DPT failures. That said, from a broader tax risk perspective, companies which could be within the charge to DPT clearly need to ensure they have appropriate arrangements in place to: (i) gather the data needed to decide whether they have any DPT obligations; and (ii) comply with the notification (and any other) time limits if appropriate.


Contact Us

Julie Hughff

Julie Hughff


KPMG in the UK

+44 (0)207 311 3287


Peter Honeywell

Peter Honeywell


KPMG in the UK

+44 (0)113 231 3764




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