UK
Ireland
Tax risk and governance
Understanding and managing tax risk is increasingly vital for businesses. To stay ahead of an evolving tax landscape, they need robust tax processes and accurate tax data. They must be able to demonstrate reasonable prevention procedures required by the corporate criminal offence (CCO), ensuring the business has appropriate tax accounting arrangements under the Senior Accounting Officer (SAO) regime and regularly monitoring tax risk in the business.
The HMRC review process is increasing its focus on tax governance among large businesses across all sectors. As part of the Business Risk Review (BRR+) process, HMRC reviews an organisation and allocates a risk rating based on several indicators measuring the strength of a firm’s tax systems, processes, policies, controls and risk management. The financial cost and reputational damage of not managing tax risk can be high.
There are also commercial considerations:
- Tax governance and compliance with the regimes form part of due diligence in exit events or refinancing (with a risk of protection or limitations being sought)
- Reputational damage for non-compliance can be significant
- Company directors face personal fines and implications for failures
- Confirmations of compliance with CCO is now requested in customer, supplier and business partner agreements
Key tax risk and governance areas
In recent years, a wide range of measures introduced in the UK have required businesses to focus on tax governance and risk management. These include the CCO of failing to prevent the facilitation of tax evasion, the SAO regime, the requirement to publish a tax strategy document online and the introduction of HMRC’s BRR+.
Three top tips for corporate criminal offence compliance
Consequences of non-compliance
Senior accounting officer: Key things you need to know
Building a strong tax risk management framework
A strong tax risk management framework is the foundation for managing business tax risk. It underpins your tax compliance and is critical to ensuring a robust approach to tax compliance and tax risk management.
The framework should be bespoke and consider the business’s operating landscape and inherent risks due to size and complexity. Compliance with the key governance regimes will form part of this framework.
Businesses of all sizes can apply our three-step approach to building a strong tax risk management framework:
- Monitor
- Review the risk framework regularly to ensure it continues to meet the business’s needs.
- Assess
- Undertake an initial assessment of the business’ tax risk and governance position. The company should identify an appropriate person responsible for tax risk.
- Respond
- Create a working action plan to reduce the level of risk in each area. Implement proportionate controls to reduce the risk without unnecessary time and effort. The business can adopt technology where appropriate to ensure controls are operating effectively.
How S&W can help support your tax risk and governance
Our expert advisors can support your businesses with all your tax risk and governance needs:
- Compliance with the various governance regimes, including CCO, SAO and BRR+
- Understanding and staying up to date with the changing tax risk landscape
- Understanding and documenting the business’s tax risk appetite
- Identifying, documenting and prioritising tax risks
- Designing, documenting and implementing tax processes and controls to mitigate tax risks
If you have any questions or would like to discuss the tax risk and governance in more depth, please get in touch.
