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HMRC internal manual

Senior Accounting Officer Guidance

From
HM Revenue & Customs
Updated
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Senior Accounting Officer main duty: reasonable steps: examples of tax sensitive judgements

Example 1

A qualifying company decides that its interest payments are allowable for corporation tax purposes but HMRC disagrees. The HMRC view of the law prevails. As long as

  • the company based its decision on a sound analysis of the facts and circumstances surrounding the issue, and
  • the decision was made by someone who is appropriately trained and experienced, or an appropriate adviser,

the company would have taken reasonable steps and HMRC would not argue that the tax accounting arrangements were inappropriate.

If however the tax accounting arrangements are not amended to ensure the correct treatment is applied in the future then the Senior Accounting Officer (SAO) will not have met their main duty.

Example 2

A food manufacturer develops a new range of snacks. The VAT liability on those snacks is not clear. The company seeks advice from a range of tax and nutritional advisors who agree that the product falls within the definition for zero-rating. The manufacturer applies this rate to its sales. Subsequently, HMRC disputes the liability and the case goes to tribunal. HMRC’s view prevails and the company has to pay a significant amount of under-declared tax.

However, because the liability was uncertain and the company sought expert advice from a range of specialists, the SAO is deemed to have taken reasonable care. There is no liability to an SAO penalty for failure of the main duty.

If, however, the tax accounting arrangements are not amended after the conclusion of the appeals process to ensure the correct treatment is applied in the future, then the SAO will not have met their main duty.