Changes to the Finance Bill 2009 in respect of the 'Senior Accounting Officer 'obligation

The Finance Bill 2009 included details of new compliance obligations for 'Senior Accounting Officers' (SAOs). Revisions to these original proposals have been debated by the House of Commons' Public Bill Committee but what will these changes mean?

What was included in the original Finance Bill?
Proposals were introduced in the 2009 Budget regarding the obligations of SAOs which were detailed in Grant Thornton's previous tax story 'Finance Bill 2009'. Broadly, legislation was to be introduced which would mean that a SAO within a large company would be required to certify annually that the accounting systems for the company and its subsidiaries are accurate for the purposes of reporting of all 'taxes and duties'. Penalties could be incurred by the senior officer personally in respect of non compliance. A set of amendments to the Finance Bill 2009 were published on 19 June 2009, and these were debated by the Public Bill Committee on 23 June 2009 with all of the amendments proposed by the Government being accepted.

What changes have been made with respect to which companies are affected?
The original proposals encompassed in the Finance Bill 2009 were to apply to SAOs within 'large companies'. Large companies were those that fell within the Companies Act 2006 definition of 'large'. The reference to 'large companies' has been removed and has been replaced by 'qualifying company', being a UK-registered company with a turnover of more than £200 million, or gross assets of more than £2 billion in the previous financial year (results of UK -registered companies in a group are aggregated when applying these limits).

This revision has been introduced in an effort to get the balance right between safeguarding revenues from larger companies and the compliance cost for business. This change narrows the base of companies within the scope of the legislation and essentially brings the new measures in line with the population of companies which have a Customer Relationship Manager (CRM) in HM Revenue and Customs (HMRC).

The definition of 'qualifying company', will only apply to companies registered under the Companies Act 2006. This means that branches of foreign companies and UK resident, non-UK incorporated companies are not expected to fall within the definition. This also provides confirmation that the provisions will not apply to partnerships (including Limited Liability Partnerships), charities, Crown Estates and public bodies.

What changes have been made in respect of reporting requirements?
One of the aspects of the original Finance Bill was that the SAO must certify for each financial year that the company, and each of its subsidiaries had 'appropriate tax accounting arrangements throughout the financial year.' This was originally defined as 'accounting arrangements that enable the liability to tax and duties of the company and its subsidiaries to be calculated accurately'.

The amendments change this definition to 'accounting arrangements that enable the company’s relevant liabilities to be calculated accurately in all material respects'. The reference to materiality can be viewed as a relaxation of the definition, which seeks to make the definition more practical. However, greater clarity about the meaning of 'material respects' will be required if companies are going to be able to place any reliance on this change in definition.

If the company is unable to state that the appropriate arrangements are in place throughout the year the original Finance Bill provided that a different certification would be required to HMRC to explain the respects in which the arrangements are not appropriate. It has now been agreed that this would work better with only one certificate, on which the SAO sets out either one position or the other.

What are the changes to the notification process to the company's auditors?
In addition to notifying HMRC that accounting arrangements were not appropriate, the Finance Bill also provided that the details in respect of this should also be provided to the company's auditors. This requirement has now been removed.

What taxes and duties are covered?
The Finance Bill did not specify the taxes and duties that were covered. However, the legislation has been amended to confirm that the SAO provisions will only apply to the following:

• Corporation tax
• Value added tax
• Amounts collect through the Pay As You Earn Regulations (PAYE)
• Insurance premium tax
• Stamp duty land tax
• Stamp duty reserve tax
• Petroleum revenue tax
• Customs duties
• Excise duties

Is there any guidance on who the SAO will be?
Yes, the Finance Bill has been amended to confirm that the SAO means the director or officer who in the company's reasonable opinion, has overall responsibility for the company's or a group of companies' financial accounting arrangements. The SAO may be a SAO for more than one company but in terms of penalties they will only incur a single penalty for a breach of each condition. Penalties will not be imposed per company.

When and what do companies need to do now?
The provisions are applicable for accounting periods beginning on or after the date that the Finance Bill receives Royal Assent. Qualifying companies are required to notify HMRC of the name of any individuals acting as a SAO for each financial year. The notification should be made not later than the end of the period for filing the company's accounts for the financial year, or within a longer period agreed with HMRC.

Yvonne Chappell, Director at Grant Thornton says: "When these obligations were initially announced there was a great deal of uncertainty about HMRC's expectations. These amendments have provided clarification in some areas, however the use of the words reasonable and material still leave some doubt. Those companies who are still likely to be affected should be assessing the adequacy of their current controls to ensure that they meet the new requirements."

Please contact us if you would like further advice on any of the above.