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HMRC internal manual

Senior Accounting Officer Guidance

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HM Revenue & Customs
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Senior Accounting Officer main duty: appropriate tax accounting arrangements: arrangements and calculating tax liabilities - Example 3

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 3 - standard and zero rating

Company C has sales which are both standard and zero rated. The company gives staff in the sales ledger department training in the coding of goods. It also supports them with a company manual, which it updates as part of its standard operating process for introducing new products. It conducts monthly reasonableness checks on the ratio of standard to zero rated goods entered onto the system. It also conducts quarterly sample checks of invoices to ensure accuracy of coding.

As there are appropriate checks and controls in place, the miscoding of a small number of invoices through human error would not be regarded as a shortcoming in the tax accounting arrangements.

If, however, there were no checks and controls in place or no mechanism for ensuring the correct determination of codes to new types of goods, then we may be 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.