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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, Partner, 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

If you would like to receive regular updates on the SAO Tax Diary and SAO Forum activity, please subscribe here.

Update on Large Business tax Compliance Consultation 



    Representatives of the central HMRC team that is responsible for the Consultation Document recently gave a presentation to a number of KPMG clients. The key points to emerge were as follows:


    1) In response to representations made already, it is unlikely that HMRC will pursue a number of its original proposals: 


  • It appears to have been decided that it will be inappropriate to make an individual board member responsible for the publication of the tax strategy, as this should be owned by the board as a whole
  • The guidance as to what such a strategy should contain is now unlikely to contain any reference to the effective rate of tax
  • It is accepted that the proposed Code of Practice should involve some mutuality in the form of a commitment by HMRC to certain behaviours
  • It is expected that the ‘special measures’ to be applied to those companies that are perceived by HMRC to be ‘serial avoiders’ will only affect a handful of the 2000 groups dealt with by the Large Business Directorate.


    These developments are good news. Although, but to strike a note of caution, there were a number of references during the session to elements of the proposals that reflect ministerial decisions and so presumably any changes will also require ministerial approval.


    2) A number of concerns were expressed by those present: 

  • Significant practical difficulties were envisaged for many companies with overseas parents. This is , particularly where what is required from a UK perspective differs from the contents of any tax strategy for the wider group. HMRC suggested that this could potentially be addressed by the inclusion of a UK specific footnote to the wider strategy, but the response to this was largely negative 
  • Questions were raised concerning the purpose of the Code of Practice, specifically whether it would add to existing relationships with HMRC where the Customer Relationship Manager (CRM) is already aware of the group’s attitude to tax. There was also scepticism concerning HMRC’s view that signing up to the code would be optional, as a failure to do so could be seized upon by those who were less well informed, potentially creating reputational damage. The participants thought that in practice, it is therefore likely that there will be considerable pressure to sign up.


    HMRC acknowledged that, perhaps not surprisingly, the same concerns had been raised at other, similar sessions.



      Views from HMRC's central SAO team



      At a recent meeting HMRC’s central SAO team expressed the view that the introduction of the SAO regime has been a success as it is achieving its objective of raising the profile of tax at board level. It was acknowledged that this has been helped by the unprecedented profile of tax governance in the media. The introduction of other initiatives, such as the current consultation on the publication of tax strategies and the introduction of a voluntary Code of Practice, have also helped.


      However, it was acknowledged that there remain inconsistencies in the approaches of individual CRMs. There needs to be more focus on the key requirement of the legislation, that SAOs should take reasonable steps to ensure that there are appropriate tax accounting arrangements, rather than the relatively minor administrative issues that have led to the majority of penalties to date. Examples of such administrative issues include; failure to submit certificates for dormant companies and the submission of soft copies rather than the original signed documents. A review is therefore underway to decide upon the extent to which some of these requirements can be relaxed.


      The way that HMRC administers the SAO regime may be relaxed, which is clearly welcome. Although it is important to note that this does not signify a return to the ‘light touch’ that was applied in its early years. Instead, SAOs can expect an increased focus on the ‘main duty’ requirement of the legislation. This includes the effectiveness of monitoring activities, with questions from CRMs concerning their primary steps, to ensure that appropriate tax accounting arrangements are in place and to decide the basis upon which the required certificate should be submitted.



      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.


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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