Includes organisations previously exempt from turnover test 

All Revenue guidance relating to senior accounting officers (SAOs) has been superseded by the department’s new Senior Accounting Officer Guidance Manual.

Deloitte’s Mark Kennedy, a director in the company’s tax management consulting team, welcomed the taxman’s direction on the practical application of SAO legislation, which requires senior finance officers of large UK companies to certify personally that their controls over UK taxes are fit for purpose.

Mr Kennedy said the revised guidance was ‘positive news for both senior accounting officers and their companies, as it provides greater clarity around some of the more challenging aspects of the rules, including the circumstances in which penalties may or may not be levied.

‘Given that the initial light touch of HMRC’s application of the rules has now ended, senior accounting officers and their businesses need to ensure any year one issues have been resolved and effective controls are maintained to minimise the exposure to penalty,’ added Mr Kennedy.

He also noted that HMRC ‘intend to amend certain specific sections of the guidance to confirm their view that the failure of a senior accounting officer to submit a certificate can be disclosed to the company’.

The new Revenue view includes the matters of banks and insurance companies, which were previously exempt from the turnover test, within scope of the rules, as well as overseas activities of UK companies. And department has confirmed that rules will apply where insolvency procedures are underway.

Background

Schedule 46 FA09 sets out rules for certain large companies. Those companies must establish and maintain their tax accounting arrangements and their Senior Accounting Officer (SAO) is responsible for ensuring that they do.

This guidance tells the reader about

• the rules that put responsibilities on those companies and particularly their SAOs
• the actions that those companies and SAOs must take
• how HMRC will ensure that they comply with the rules, and
• the penalties chargeable if they fail to comply.

Schedule 46 FA09 neither replaces nor supersedes other penalty provisions; rather it is complementary to these provisions in the context of Large Business.

What taxes are covered?

The Senior Accounting Officer provisions of Schedule 46 FA09 apply to the accounting arrangements that allow the relevant liabilities to be calculated for:

• Corporation Tax including Quarterly Instalment Payments and any amount assessable as if it were CT
• Value Added Tax
• Pay As You Earn
• Insurance Premium Tax
• Stamp Duty Land Tax
• Stamp Duty Reserve Tax
• Petroleum Revenue Tax
• Customs Duties
• Excise Duties including Air passenger Duty
• Bank Levy.

Those accounting arrangements may have a degree commonality with the accounting arrangements for taxes that are not in the list above.

FA09/SCH46/PARA14 (3)

Who is an SAO?

A Senior Accounting Officer (SAO) of a company is the director or officer who has overall responsibility for the company’s financial accounting arrangements.

The role of the SAO cannot be filled by an agent – for example, the company’s external audit or accountancy advisers. The SAO provisions make this a key role and responsibility within the company or group. It cannot be out-sourced or assumed elsewhere.

A person may be the SAO of more than one company. A person may be the SAO for a number of companies within a group. Equally a person may be the SAO of a number of companies that are not within the same group.

There has been a lot of commentary by all sides of the mainstream political spectrum about the burden of taxes. One particularly irksome entry into popular parlance when discussing this is the phrase “fair” or “fair share”. Some commentators seem to think that fairness is making one group of people shoulder the burden more heavily than another group of people. I happen to believe that “fairness” is closer achieved by everybody paying the same. Higher earners already pay more because they earn more. Then they are hit again by a higher rate on the “more” that they earn. If they are fortunate to earn even more they are hit twice more, firstly by the withdrawal of personal allowances, then by yet another increase in the tax rate that they pay. Given the current hysterics over fairness, and the popular view that somehow the rich are not paying their fair share I thought it would be useful to throw a little light on the subject with some cold hard facts. Without further ado, here are those facts.

The source for these numbers I took from the Institute for Fiscal Studies report published in November 2011. This report in itself references the data as HMRC’s own data as http://www.hmrc.gov.uk/stats/income_tax/table2-4.pdf and various Inland Revenue Statistics.

I’m not arguing here that some taxpayers don’t arrange their affairs so as not to pay more tax than they would otherwise have to. Many do, and I defend their right to do so provided that it’s genuine tax avoidance and not illegal tax evasion, but lets stop beating up on those that are already shouldering a huge proportion of the overall burden. They are already paying well more than a “fair” share.

Following Revenue and Customs Brief 10/12, HMRC have changed their practice relating to the Seafarer’s Earnings Deduction (SED)

Until 5 April 2011 SED was only available to seafarers who were ordinarily resident in the UK. From 6 April 2011 SED was extended to non-UK resident seafarers who were resident in a European Union or European Economic Area state and performed duties partly in UK waters on which they paid income tax in the UK. See EIM33010 – Seafarers’ Earnings Deduction: claims to the deduction from non-UK resident seafarers.

HMRC now recognises that EU law requires claims for SED for tax years before 2011/12, by those who were not UK resident or ordinary resident in the relevant tax year, should be allowed where the claims are made within the same time limits that apply for making such claims by those who were UK resident or ordinary resident in the relevant tax year.

A tax tribunal has determined that despite a property rental activity being a “business” for income tax purposes it is not a “business” for Capital Gains Tax purposes with the consequence that roll over relief on incorporation has been denied.  It’s a curious decision.  Income Tax and Capital Gains tax are subject to entirely seperate legislation, but one would naturally assume that if a business is a business for income tax purposes it should naturally be considered the same for capital gains tax purposes.  Not according to the decision of the Tribunal!

The article is reported in a little more depth here

Tories to Scrap IR35 – Geeks Rejoice

UPDATE

Mark Prisk, the Shadow Business Minister, has announced that a Conservative Government would undertake a full and fundamental review of small business taxation, including IR35.  The aim will be to provide a simpler, clearer and lasting tax regime, so businesses can plan with confidence. ”For the last 13 years, Labour have constantly meddled with the tax rules for freelancers and self-employed, Prisk said. “IR35 has especially proved to over-complex, uncertain and often unfair”.

LINK

The very kind @charonqc a twitter friend of mine has donated this painting to me.  The painting is titled “Let there be greed”.  A veritable thank you to M’learned, @Charonqc who has declined my offer of payment for his work.

Erm, well it’s probably more scientific than the “hide the decline” psudoscience the CRU were using.

In a recent update, HMRC says it is pressing ahead with Lord Carter’s recommendation that the main business tax returns should be submitted online by 2012.  HMRC plans to phase out the use of paper VAT returns from April 1 2010, and is running nationwide events to help taxpayers make the change.

From that date, business with an annual turnover of £100,000 or more excluding VAT, and all newly registered VAT businesses, will be required to file their VAT return online.

HMRC said paper returns would still be an option for the remaining VAT registered businesses, but cautioned that this choice would be reviewed in the run up to 2012.