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HMRC internal manual

Senior Accounting Officer Guidance

Senior Accounting Officer main duty: appropriate tax accounting arrangements: Arrangements and calculating tax liabilities - Example 2

The examples in SAOG14350-3 illustrate some situations where appropriate tax accounting arrangements allow tax liabilities to be calculated accurately in all material respects. These examples also include ‘alternative’ scenarios where the tax accounting arrangements are not appropriate because they do not, or may not, allow relevant liabilities to be calculated accurately in all material respects. The examples illustrate the point but are not exhaustive.

Example 2 - taxable allowances

Company B has a system in place to distinguish between allowances taxable on employees under PAYE and expenses that should be paid without tax deducted. The two types are coded differently. The company gives the members of staff inputting the expenses onto the system comprehensive guidance on which code to use. It also makes a member of staff responsible for reviewing the amounts entered as part of the month end procedures.

Despite these arrangements very occasional inaccuracies occur as a result of coding mistakes. These are reviewed monthly to consider the reason for them occurring but are generally found to be keying errors. Because the business has put in place comprehensive guidance for staff, a separate check of the data at the end of each month and a review of any errors we are likely to regard the accounting arrangements as appropriate.

If, however, the company did not keep the relevant guidance up to date or did not put checks and controls in place to ensure that this is being applied properly then we are likely to take the view that there were shortcomings in the tax accounting arrangements. An example of how this shortcoming might be expressed on a qualified certificate is provided at SAOG15450.