Companies ignoring tax sign-off legislation

RESEARCH by business advisory firm Deloitte has revealed that a large number of companies are yet to address compliance with senior accounting officer (SAO) legislation.

The SAO sign-off measures came into effect for tax returns including VAT and employment taxes for financial years starting on or after the date of Royal Assent on July 21.

Companies with a July year end are already nearly three months into the implementation of the new rules while firms with December year ends have just two more months to identify and plan to or correct any weaknesses.

Though the legislation offers businesses the opportunity to make use of a ‘light touch’ approach by HM Revenue & Customs in the first year, the SAO will still need to demonstrate that they are taking reasonable steps to begin a review of the appropriateness of the tax accounting arrangements in their business.

The poll of senior finance and tax figures found that more than 40% of firms had done nothing to achieve compliance even though only 8% were comfortable their organisation could provide the necessary sign off.

Around 80% believe that it will cost at least £50,000 to achieve compliance with SAO legislation while 11% predict it will cost £250,000 or more – up from 5% in May.

Half of firms say VAT is the area of tax which is causing them most concern followed by PAYE (23%), corporation tax (19%), excise & duties (5%) and all other taxes (3%).

And although 75% of tax professionals believe the SAO legislation will give them the resources and the opportunity to carry out transformational rather than merely compliance work in their tax department now or in the future, 40% of repondents said that the legislation would not achieve its stated aim of putting tax compliance on the board agenda.

Richard Williams, tax partner in Deloitte’s Leeds office, said: “Almost all of the businesses we surveyed feel they will need to do some additional work as a result of the rules including assessing where their risk areas are and improving key processes.

“While HMRC has worked hard to try to assure business the rules will not have a significant impact on compliant taxpayers businesses remain worried. There is a possible silver lining though as 70% think the work they will carry out will make their lives easier in the long run.”

Deloitte is to co-host a seminar on SAO legislation with HMRC on December 2 starting 4pm in Leeds.

For further information contact Louise Best on 0113 292 1473, email lbest@deloitte.co.uk or Arran Taylor on 0113 292 1118, arrtaylor@deloitte.co.uk.