Budget 2009 – senior accounting officers of large companies

Finance Bill 2009, cl. 92 and sch 46, introduces new duties for the senior accounting officers of large companies.

The senior accounting officer is the person who has overall responsibility for a company’s financial accounting arrangements. This seems to be poorly defined but, with there being an obligation on the company to notify HMRC of the identity of the SAO, the matter will be left in the hands of the company to decide. In any event, the reference to the company’s financial accounting, as opposed to tax accounting, arrangements will, presumably, force companies to nominate a main board director as opposed to a “director of tax”, being a position often held below board level.

The main duty of the SAO will be to ensure that the company, and any subsidiaries, establishes and maintains appropriate tax accounting arrangements in respect of the first, and subsequent, financial years of the company commencing after the Finance Act is passed. The SAO is also obliged to take reasonable steps to monitor the tax accounting arrangements, and to certify to HMRC that suitable arrangements were in place for the financial year, or to explain where the deficiencies existed.

The obligation to establish and to certify the appropriate tax accounting arrangements extends only to UK taxes and duties. It is not readily apparent why the obligations do not extend further and especially when many of the groups of companies who will be so obviously caught by the new rules have significant non-UK activities which will impact on UK tax exposures.

The maximum penalty for each failure under the new rules will be £5,000 and with the penalty being civil in nature (in contrast to those for breaches under health and safety or minimum wage legislation) the sanction for non-compliance with the new rules does seem to be somewhat lacking in deterrent value.

Whilst the initial impression was that the new rules would apply only to those companies, and groups of companies, which are the largest payers of corporation tax, the proposed legislation (at para 17) adopts a Companies Act definition of a large company.It does, therefore, appear that a number of much “smaller” companies will fall under the new rules including those which are non-listed PLCs, or undertaking FSMA regulated activity or insurance market activity.

Updates: here and here and here