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About In House Tax

About In House Tax

This weblog is a news and views site for tax professionals within the UK and international in-house tax community.  You will find information about appointments and people moves in and around the in-house tax market, issues affecting the in-house tax professional, opinions on the state of the tax job market, updates on tax technology, and other general thoughts of the day.

Hope you find it useful.

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Location: St Albans, United Kingdom

This site has been developed by Simon Godley, who also runs the niche tax recruitment company Talentpool Selection . Simon spends a lot of his time placing tax specialists into FTSE companies, large in-bound groups and some professional services organisations. He also recruits and is well networked around the UK tax technology and VAT markets.

Tax News

FDs and the SAO regime

Tuesday, 1 December 2009

Source: The Financial Director newsletter
Written by: Peter Williams

FDs are being lumbered with the senior accounting officer role ­ but, oddly, they’re not protesting

UK finance directors are facing one of the biggest changes in compliance to hit their companies in decades. But you can’t hear so much as a collective tut. The introduction of the concept of a ‘senior accounting officer’ or SAO is more than a corporate imposition; it is a personal threat to each and every FD. So where are the voices raised in protest? So far, nowhere to be seen. And that’s astonishing.

As this issue barely seems to have hit the radar, FDs may need reminding why they should be up in arms. The 2009 Budget introduced requirements for the SAOs of large companies and groups to report to the taxman on the adequacy of their accounting systems for tax returns. And the real sit up-and-take notice bit? The SAO will be personally responsible for complying with these new requirements. And just to confirm the inevitable: a poll by PricewaterhouseCoopers indicates that more than 80% of companies are naming their FDs their SAO.

The SAO sign-off measure came into effect for financial years starting on or after the date of Royal Assent on 21 July 2009. At the moment, the regime only applies to companies or groups with turnover of more than £200m or gross assets of £2bn so big companies with a July year-end are already dealing with these requirements. The majority of companies with December year-ends have little time left to put their house in order. Under the rules, the SAO will have to provide annual assurance to HM Revenue & Customs that appropriate tax accounting policies and processes are in place and maintained.

The SAO regime is reminiscent of the US’s Sarbanes-Oxley Act, which also forced companies to focus attention on risk and processes. However, while Sarbox was greeted with howls of outrage and non-US companies threatening to quit the US to avoid falling under its regime, SAO has been meet with equanimity.

Perhaps the calm is due to HMRC saying it will apply a light touch in the first year of implementation. Even so, the SAO will still need to be able to demonstrate that their company is taking reasonable steps to review the appropriateness of the tax accounting arrangements in their business. Let’s put this in a wider context: as recession bit, government tax revenues collapsed. It desperately needs as much cash as it can lay its hands on, so squeezing big corporates looks like as good a source as any and the SOA legislation looks like an irresistible tool to make tax revenues flow.

Surprisingly, the PwC survey suggests that, among tax professionals, the SAO is seen in a relatively positive light, with one-third saying it provides an opportunity to drive improvements, such as reducing manual interventions. But then, the tax guys aren’t likely to be the SAO, so might be quite happy to see their FD boss squirming under the compliance spotlight.

The SAO regime covers different taxes and looks at the totality of processes and systems used to support tax compliance. The tax named as having the biggest risk was VAT, named by 54% of the survey, followed by corporation tax (22%) and PAYE (19%).

Tax is notoriously difficult to get completely right and the interface between it and the other part of a company’s financial systems is often held together with little more than a few tired spreadsheets. Even so, the message from UK plc is that the SAO sign-off will not be a major problem.

HMRC says it believes most groups are compliant but that there is a minority of large companies that need encouragement to up their game. The rationale as far as HMRC is concerned is that it wants senior management to take responsibility for systems and processes that can calculate and file accurate liabilities. It says there is an accountability gap in this area. Of particular concern to the taxman are those grey areas of the paypacket: expenses, benefits, short-term travel, secondees, entertaining, equity and termination. So as long as FDs can confirm everything is OK with those issues then my concerns are little more than journalistic hyperbole, even if the requirements are unlike anything seen in UK tax law, imposing personal duties and potential penalties on individual officers.

The only real positive that comes from this querulous piece of legislation is that tax may become a topic of more frequent discussion in the boardroom. And if that does happen, then it may act as a spur for companies to invest properly and substantially in their tax systems, bringing about, in many cases, long overdue transformation. Figures of spend of more than £50,000 seem to be the best guess for most companies, according to a Deloitte survey. But 10% think it will cost £250,000 or more to achieve compliance.

Maybe that figure needs to be set against the personal penalty for the SAO of £5,000 in relation to each failure of duty for each year. That bill will be covered by insurance: the cost to the FD’s personal reputation is not insurable.

Peter Williams is a chartered accountant and freelance journalist

SG comment: I thought this was a good article, which sums up the SAO regime situation so far, and also supporting evidence for large companies investing more heavily in tax technology systems over the next few years.

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posted by Simon Godley


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