Budget 09: Comment - Thanks, Darling, for the British Sarbox

If you’re a finance director in a large company, you now work for HMRC. In a sense, of course, we all work for HMRC, and those of you earning over £150K will be working for them harder than ever.

In the face of a vast, vast Budget deficit, the government is anxious to protect what little revenue it still has. This is where you come in: “senior accounting officers” are to be given a new statutory duty to personally certify that adequate controls are in place to prepare accurate tax computations. And you’ll have a £5,000 personal penalty if you screw it up.

Exactly why it seems necessary to overlay this extra bit of bureaucracy on top of the existing statutory duties to (and I paraphrase, here) not lie to the taxman and rip him off, remains stunningly unclear at the moment. Stephen Timms, the government minister who signed off the impact assessment, says that companies are expected “to take reasonable care to ensure that they declare the correct tax liability”, he justifies the new measure by saying that “HMRC may not discover that care has not been taken” (so another signature on another piece of paper is going to help, yeah?) “or the accountabilities within the company may be insufficient” – which we dare to suggest seems a little unlikely given that the measure is aimed at large companies (roughly, those with turnover greater than £22.8m or more than 250 employees).

The requirement is apparently based on the much-derided US Sarbanes-Oxley legislation. So that’s good news. And the Treasury has worked out that while there are around 2 million companies, only around 60,000 are big enough to be subject to the new rule. So that’s good, too. But most of these are companies within groups, so there’s only around 1,600 to 2,000 groups involved. So that’s good, too.

Oh, and by the way, the measure is expected to raise £140m. Over four years. Which seems like a surprising small yet precise number, to us. Still, when the Budget deficit has more zeroes than a Zimbabwean fiver, every penny counts, I guess.