Frequently asked questions about tax governance

Compliance with tax governance regimes feels like a significant additional administrative burden for businesses – what is the rationale behind them?

HMRC view large businesses as having the greatest access to resource (be that in house expertise, or the funds to employ external advisers).  If large businesses are to an extent able to self-certify the quality of their systems and processes, this enables HMRC to focus their resources accordingly.

It seems like a lot of procedural documentation to produce – where should I start?

It is unlikely businesses will need to start from scratch.    In terms of the senior accounting officer ‘file’, risk registers/process notes may already exist with the finance team, perhaps as something the auditors have asked to be prepared in the past.  For the corporate criminal offence, there is overlap with the Bribery Act for example, so it may be possible to use content from existing policies; It is worth noting however that such policies are likely to be owned outside of the finance team, and therefore, it will be important to involve legal/compliance teams for example.

Who should be the Senior Accounting Officer (SAO)?

HMRC’s guidance allows flexibility, accepting that businesses are operationally structured in different ways and sometimes it may be appropriate for a group to have more than one senior accounting officer.  What is important however is that the selected individual(s) is/are suitably senior to be considered to have overall responsibility for “tax accounting arrangements”.

I’m not sure our business really has a “tax strategy”?

For a limited number of businesses, publishing their tax strategy gives them the opportunity to counter previous bad publicity about how they manage their UK tax affairs (Starbucks, Google for example). But for the majority, it is not a PR tool, and those groups will probably choose to publish the minimum required.  It is however an opportunity for management to reflect on the group’s general approach to tax planning and tax risk, and consider whether this is aligned with business’s strategy more generally.

It seems easy to drop in and out of the regimes if turnover etc fluctuates around the threshold amount – how do I stay on top of this?

Somebody in the business should have overall responsibility for tax governance matters, and monitoring whether the group remains subject to the regimes, or should engage an external advisor to do this for them.

What happens if we choose not to comply?

Penalties for non-compliance with these regimes is higher than for other areas of tax, going back to the point above eg. large businesses are assumed to have the greatest access to resource.  As well as financial cost, the corporate criminal offence regime allows HMRC “to name and shame” those who fall foul of it.

In addition, HMRC will review tax governance as part of any (BRR+) reviews it undertakes (business risk review plus) – poor or non-compliance in this area will feed into the group’s overall risk rating, making it more like to be enquired into (which of course comes with cost financially and also in terms of management time).