19th November 2020Caution: CFOs of growing UK large businesses need to plan for a different relationship with HMRC

CFOs of large UK business approaching group turnover of £200m and/or net assets in excess of £2bn need to be preparing for a change in the way HMRC deal with large companies. This applies to large UK companies, either of UK groups or UK subsidiaries of overseas parent companies.

What will change?

Large UK businesses will usually be assigned a Customer Compliance Manager (CCM) by HMRC who will lead the relationship.  The HMRC will undertake a Business Risk Review (BRR) each year to determine how it will approach its review of the corporate tax returns.  Businesses will be graded low, moderate, moderate-high and high risk. Key areas HMRC will look at in assessing its risk rating will be Senior Accounting Officer (SAO) regime and the company’s Tax Strategy.

The SAO regime covers the internal controls for all taxes in an organisation.  An individual or multiple individuals need to be appointed as SAO (this usually falls to the Group or UK CFO).  They have personal responsibility for ensuring the organisation has “appropriate accounting arrangements” in place and are required to sign a certificate each year to HMRC.  There are personal penalties of £5,000 for each of the following:

• failure to notify HMRC who the company’s SAO is within the required timeframe,
• failure to file a SAO certificate within the required deadline, and
• failure to take reasonable steps to ensure that the company establishes and maintains appropriate tax accounting for the financial year.

It is important that the SAO has confidence that the tax compliance processes, controls and documentation is in line with HMRC expectations and has been subject to testing at a granular level. Granular testing is not usually something an internal audit function can help with, as they will operate testing at the group materiality thresholds.

In addition, HMRC expect that large UK companies publish externally on a website its UK Tax Strategy and comment on the board’s attitude to tax planning and compliance.

HW Fisher can provide advice and support to companies with their SAO and Tax strategy obligations, including an SAO report on the annual process, documentation and controls including annual testing of those controls by subject matter experts to the SAO and the board of directors and drafting a Tax Strategy for publication on the company’s website.