Wednesday 21st November, 2018
According to a statement by International law firm Pinsent Masons, 125 CFOs and senior finance executives have been fined by HMRC. Making it a 9% increase in the last 12 months, with 115 being fined in 2016-17.HMRC can issue personal fines of around £5,000 to the senior executives of large businesses as part of the Senior Accounting Regime (SAO), which was introduced in 2009. This can put additional pressure on senior executives and Chief Financial Officers (CFOs) to properly account for the business income and expenditure for tax purposes.
According to Accountancy Age, the law firm claimed that this forms a big part of HMRC’s “increased focus” on making those who hold senior positions personally liable for any errors found in their accounting of business expenditure and income. Back in 2012-13, only 46 people holding this position were fined under the SAO regime by HMRC; this is markedly less than the 125 fined this year.
Pinsent Masons stated: “HMRC is treating claims of self-employed status in some industries with much more scepticism than it may have done in the past. Finance directors can be deemed to be responsible – and fined accordingly – if the tax authority determines that they did not have adequate arrangements in place to prevent de facto employees being treated as contractors.”
Furthermore, HMRC has been criticised by the Tax Tribunal for being markedly more heavy-handed in their approach when imposing these fines. “In one case, the Tribunal criticised HMRC for punishing a CFO long after he had left a business, and no longer had access to evidence with which to defend himself,” the law firm continued. However, HMRC’s increased focus was largely on employment tax compliance – for example, ‘disguised employment’.”
Pinsent Masons’ partner, Jason Collins, concluded: “HMRC is showing no sign of letting up on CFOs. Finance directors need to be aware that they are personally in the tax authority’s sights if their businesses make errors in accounting.