The Government's decision to make Senior Accounting Officers (SAOs) personally responsible for the adequacy of their company's tax systems is causing major controversy, an expert has cautioned.

Simon Littlejohns, tax partner in the Birmingham office of PKF Accountants & business advisers, warns that individuals can personally face fixed penalties of £5,000 if they get it wrong.

The proposals first published in the 2009 Finance Bill have been watered down, but remain a worry.

SAOs will face onerous new reporting obligations. They must take reasonable steps to establish and monitor accounting systems within their companies and ensure that they are adequate for the purposes of 'accurate tax reporting'.

Mr Littlejohns said: "He or she must also certify annually that the systems are adequate, or specify the nature of any inadequacies to HM Revenue & Customs (HMRC).

"When these measures were announced in this year's Budget it was expected that they would apply to all companies defined as large under the Companies Act 2006. However, the Government changed the definition such that a large company for these purposes is one with a turnover in excess of £200 million or gross assets of more than £2 billion. HMRC has subsequently confirmed that it intends only to enforce the rules for companies dealt with by a Customer Relationship Manager at its large business office.

"Whether or not this policy changes in the future, it is clearly becoming ever more important that finance directors of all companies ensure that their tax compliance procedures, covering all taxes, are efficient and deliver both accurate and timely tax information."

In effect, SAOs of large companies will be required to provide personal certification that their accounting systems are capable of delivering accurate tax reporting.

There is a potential £5,000 fine for the SAO if he or she fails to take reasonable steps and fails to give the necessary certification. This is in addition to any penalty that the company may be liable to for submitting incorrect returns. A further penalty of £5,000 is triggered for the company if it fails to notify HMRC of its SAO's identity.

The rules do not apply to non-UK registered companies, partnerships, charities, crown estates or public bodies but HMRC estimates that approximately 2,000 companies will be affected. And it could mean much greater monitoring and review commitments.

SAOs are likely to insist on full reviews of their companies' systems to protect their personal reputations and PKF suggests that businesses which do not yet meet the qualifying criteria should also look to build on systems and processes already in place to improve their tax reporting if they want to avoid unwanted attention from HMRC.  

The response follows the G20 Summit meetings in London in April.

The changes are intended to provide increased transparency of the tax affairs of large corporates.