Increase In Tax Penalties Issued To UK Financial Directors
The number of penalties issued under UK tax authority’s Senior Accounting Officer (SAO) regime more than doubled in 2014-15, according to research by international law firm Pinsent Masons.
Pinsent Masons said that 155 fines were issued in 2014-15, up 112 percent on the 73 issued the previous year. The SAO measure was introduced in the 2009 Finance Act and requires a qualifying company to identify a SAO who will take reasonable steps to ensure that the company has appropriate accounting arrangements in place. A penalty of GBP5,000 (USD7,445) is chargeable to the person responsible for a failure to maintain appropriate tax accounting arrangements or to disclose any deficiencies identified.
The rules apply to UK businesses with a turnover of more than GBP200m and/or a balance sheet total of more than GBP2bn for the preceding financial year. Each company in a group of companies meeting these thresholds must individually comply.
Pinsent Masons said that HM Revenue and Customs (HMRC) initially adopted a “light touch” approach to the regime’s operation. No penalties were issued in the first three years of investigations. However, Pinsent Masons added the increase in penalties issued is indicative of an increasingly hard-line approach by HMRC.
Jason Collins, Partner and Head of Tax at Pinsent Masons, said: “HMRC are clearly not afraid to hold individuals at some of the UK’s largest companies personally liable for not complying with the rules. Senior Accounting Officers need to ensure that they take the process seriously and fully understand the requirements set out by HMRC. The policies, procedures, and systems in place to ensure tax compliance need to be as robust as possible – the Revenue is quite clearly not afraid to place them under the microscope.”
“Without adequate controls, the scope for error in tax accounting is huge – all processes need to be supported by appropriate planning, risk assessment, training, and testing, to help minimize the potential for mistakes. Given the scale of the money flows in these businesses, one weak link in the reporting system could result in a large under-declaration of liability.”
Source: Tax-News – Increase In Tax Penalties Issued To UK Financial Directors
