In the Budget 2009, the Government announced surprise proposals to effectively make large companies’ Senior Accounting Officers (SAOs) personally responsible for the adequacy of the companies’ tax accounting arrangements/systems. The proposals cover all taxes (including PAYE/NIC etc and VAT) and, if they don’t meet the new obligations, SAOs could be charged a personal penalty of £5,000. The company itself could also be charged a separate penalty.
The obligations apply to ‘qualifying companies’ for financial years beginning on or after 21 July 2009.
Who is the SAO?
The SAO, is the director or officer with overall responsibility, as appropriately delegated, for the company’s financial accounting arrangements. The company will judge who best fits this definition, and in most cases this will be evident from the established governance arrangements.
What is a 'qualifying' company?
Companies will be affected if they have either or both:
- Annual turnover exceeding £200m;
- Total Balance Sheet value exceeding £2billion.
These criteria have been significantly increased from those originally proposed in the Budget; effectively removing a large number of companies from these requirements.
What is required of the SAO?
Currently, SAOs will be required to:
- Take reasonable steps to ensure that the company (and any subsidiaries) establishes and maintains adequate tax accounting systems; and
- monitors those systems, such that any inadequacies in them are identified and brought to the attention of the company’s auditors.
SAOs will also be required to annually certify that these requirements have been met.
Commentary
Large ('qualifying') companies must start preparing for the changes. Who should be the SAO? What assurances will they themselves need from others in the company (e.g. the Tax department or Human Resources) to allow them to certify the adequacy and accuracy of the company’s accounting systems? Will the company’s current accounting system allow such a certification to be made?
For more information, please contact Terry Baldwin on 020 8309 2555.
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