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Tax assurance, compliance and risk management

Understanding and managing tax obligations and risks

Corporate governance obligations impact UK companies of all sizes not just large companies

In recent years there have been a growing number of requirements placed on businesses to provide more transparency and take more accountability for tax compliance.

Often, the larger the business the more onerous the obligations but all businesses are affected by the increasing complexity of tax compliance. No matter the size of your business we provide a full range of services to help you manage your tax risk and ensure your business is compliant with the latest tax assurance and transparency requirements.

We recommend that the best way to manage your businesses tax obligations and risks is to undertake a tax risk review. Our specialists can provide varying levels of support to help you identify and manage those risks.

The corporate criminal offence (CCO)

The corporate criminal offence (CCO) requires every business to minimise the risk of a person working on their behalf (including internal and external workers) facilitating tax evasion. This legislation covers all businesses including limited companies, partnerships, LLPs and charities.

Businesses must demonstrate that reasonable steps were in place to prevent the facilitation of tax evasion occurring. HMRC’s guidance sets out that, at a minimum, all organisations should undertake a risk assessment which is reviewed regularly.

Non-compliance can lead to fines which are unlimited. In addition, we are seeing the CCO rules being considered in the due diligence process more frequently, so it’s important you have a risk assessment and documented procedures are in place to mitigate the facilitation of tax evasion.

Our CCO experts can work with you to ensure your business is compliant with the CCO legislation. We have experience in supporting businesses with carrying out risk assessments, developing mitigating policies and procedures and presenting them to HMRC. We also provide advice on proportionate follow up actions to enable your business to demonstrate it has taken reasonable steps to prevent the facilitation of tax evasion.

Senior accounting officer

These rules require UK companies to nominate a senior accounting officer (SAO) who must take responsibility for ensuring that the appropriate tax accounting controls are in place.

The rules apply to standalone UK companies and the combined results of UK companies in the same group, when turnover exceeds £200 million and/or the balance sheet total exceeds £2 billion for the preceding year.

These limits are ‘UK group’ limits and therefore a small UK company which is part of a larger international group may not have to comply with the SAO obligations.

Each year the company must notify HMRC of the name of the SAO – this should be a director or officer responsible for the company/group’s financial arrangements. The SAO must then submit a certificate confirming that either the arrangements are appropriate or highlighting and explaining any shortcomings in the tax accounting arrangements. Both notification and certification must be provided no later than the accounts filing date.

Where obligations under the regime are not adhered to £5,000 penalties can be levied on the UK company and personally on the appointed SAO.

We can guide you through the requirements, helping you assess the obligations of your company, keep you up to date on your filing requirements and help you to ensure that your deadlines are met.

We can also support you in ensuring appropriate tax accounting arrangements are established and maintained. Our experts have experience in supporting businesses with their tax risk register, identifying the highest risks and suggesting mitigating controls. We also offer health checks of the various taxes covered by the SAO rules.

Tax strategy publication

HMRC require large businesses and partnerships to publish a tax strategy which can be easily accessed on their website. The rules apply to:

UK companies with a turnover of over £200m or a balance sheet total of £2bn
Companies that are part of an international group with consolidated turnover of greater than €750m, regardless of UK turnover

The strategy must be updated and approved by the board of directors annually and include information about the group’s approach to tax risks and tax planning.

There is an initial penalty for non-compliance of £7,500 and further penalties for continued non-compliance.

Due to the size criteria, small UK entities may be caught by these rules through being part of a large multinational group.

We can guide you through the requirements of the legislation and help you draft and ensure your tax strategy is in line with the latest requirements set by HMRC.

Notification of uncertain tax positions

Certain large companies and partnerships are required to notify HMRC where they adopt an ‘uncertain’ tax treatment, and the tax advantage is over £5m.

The regime applies to large companies, partnerships and LLPs including both UK resident entities and non-UK resident entities that have a UK presence. Broadly, the regime applies to companies or groups with turnover above £200 m and/or gross balance total more than £200 bn.

There are two ‘triggers’ for when the tax treatment can be said to be uncertain. One centres on a provision being recognised in the business’s accounts that an alternative treatment to the one adopted could apply; and the second when a chosen tax treatment deviates from HMRC’s ‘known’ interpretation of the law.

The rules cover corporation tax, VAT or income tax (both self-assessment and amounts collected via PAYE). Penalties for non-compliance are £5,000 for a first failure, increasing to £50,000 for repeat offenders.

We can support you in identifying any uncertain tax treatments your business has and guide you through the notification process.