Senior Accounting Officers For Large Companies - Technical Update 3 July 2009

Author:Mr Deloitte Tax Group

The Senior Accounting Officer legislation has now been

published in what is expected to be its final form. Draft HMRC

guidance has also been released. Thus affected companies now have a

better basis for assessing the effect of the new legislation, in

particular what reasonable steps will be required by a Senior

Accounting Officer (SAO) to ensure that appropriate tax accounting

arrangements exist. However, it is unlikely that we will see

definitive standards or benchmarks against which processes can be


  1. Introduction

    Government-approved amendments to the Senior Accounting

    Officer legislation were all agreed to in the Public Bill Committee

    debate on 23 June 2009. We do not now expect there to be any

    substantive changes to this revised legislation. It is not,

    however, yet substantively enacted – this is expected on

    7 or 8 July 2009, with Royal Assent expected to follow on 21 July

  2. Over the last few weeks there have been a number of discussions

    between HMRC, business and professional advisors resulting in the

    draft guidance which was published this week. The guidance provides

    a high level base for interpreting what is required by SAOs and the

    systems over which they have responsibility. However, the guidance

    is not prescriptive and there are therefore no hard and fast rules

    as to what would be considered appropriate, and any interpretation

    is likely to be subjective.

    In summary the provisions:

    Require compliance with the 'main duty' for an SAO to

    take reasonable steps to ensure that a company establishes and

    maintains appropriate accounting arrangements;

    Are expected to ensure that tax is on the boardroom agenda and

    is given appropriate attention;

    Are not expected by HMRC to introduce a costly and complex

    bureaucracy for large companies but to link tax governance to

    HMRC's co-operative approach to working;

    Contain the ability to impose personal penalties on SAOs who

    fail the main duty or who provide a late or incorrect


    Are not SOX for tax

    A number of "technical" uncertainties in the initial

    legislation have now largely disappeared. However it will remain a

    difficult for many companies to apply the legislation to their own

    particular facts and circumstances.

  3. Main changes to the provisions

    (1) Further to Stephen Timms' announcement in the Commons on

    13 May 2009, the scope of the SAO legislation has been limited,

    broadly to companies with a Customer Relationship Manager (CRM).

    This has been achieved by moving away from the Companies Act

    definition of "large company" and instead using a

    turnover or balance sheet total test with much higher thresholds of

    £200m and £2bn respectively. Broadly, the tests are

    considered by aggregating the corresponding figures for all UK

    companies within a world-wide 51% group. This means that either all

    the UK companies in a group will be "qualifying

    companies" or none will.

    (2) In the original Finance Bill, a large company was not a

    'large company' in its own right if it was in a group or

    sub-group headed by another 'large company'. No such rules

    remain within the revised legislation so the legislation applies to

    each qualifying company in a group. However, one certificate may

    relate to a number of qualifying companies in the same group.

    (3) It is now clear that the legislation can only apply to UK

    incorporated companies. In particular it cannot apply to foreign

    companies with UK branches, UK resident...

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