Senior Accounting Officer

The Senior Accounting Officer (SAO) regime forms a key part of any large business’s tax governance and tax risk management framework. SAO is not just a compliance requirement. It can be used as a valuable tool to drive improvements in key tax processes and systems.

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The SAO regime covers a range of taxes and duties and aims to ensure that qualifying companies have adequate systems in place so that the correct tax liabilities are reported to HMRC.

Qualifying companies must appoint a director or officer who takes overall responsibility for the company’s financial accounting arrangements. The main role of the SAO is to take reasonable steps to establish and maintain appropriate tax accounting arrangements. Penalties for failure to comply can be levied on the SAO personally, as well as on the company. Arrangements are considered appropriate if they enable the company’s relevant UK tax liabilities to be calculated accurately in all material respects. Qualifying companies must notify HMRC of their nominated SAO each year.

The SAO is required to prepare and submit an annual certificate indicating whether or not the entity has established and maintained appropriate tax accounting arrangements during the financial year.

Given the personal liability that can apply to SAOs, it is important that they make sure they have fully complied with the requirements of the regime, including documentation and evidence.

Some common challenges we see are:

  • changes in group structure;
  • changes in personnel;
  • deficiencies in existing controls;
  • reliance on non-tax staff;
  • manual processes and data input; and
  • evidencing and testing of processes.

How we can help

  • Whether your business is approaching the size limits for SAO for the first time, or has been within the regime for several years, our specialist SAO team can support you with the relevant compliance:
  • preparing or reviewing notifications and certificates;
  • identifying qualifying companies and relevant periods covered by the regime;
  • carrying out a SAO ‘health-check’ to review existing tax controls and processes and evaluate potential risks and opportunities;
  • using existing documentation and controls to provide bespoke and practical control recommendations to be implemented;
  • implementation of SAO governance framework, including the preparation of detailed process maps of key tax processes;
  • introducing methods to help track SAO compliance and serve as documentary evidence for HMRC. For example, we can support with producing a SAO checklist or implementing technology changes to systems to evidence to the SAO that processes have been followed throughout the year (this can also be linked to the Business Risk Review process for large corporates); and
  • where errors have occurred, helping you to understand how they arose, advising on changes to processes to ensure they are not repeated and disclosing to HMRC as necessary.

What is Senior Accounting Officer (SAO)?

The SAO regime requires qualifying companies to demonstrate that their tax accounting arrangements are robust and appropriate. The SAO regime targets an entity’s tax governance and systems, with a view to ensuring correct tax reporting and payment. 

A qualifying company must appoint a SAO who, in the company’s reasonable opinion, has overall responsibility for the company’s financial accounting arrangements. Many businesses often choose their Chief Financial Officer to be their SAO.

Which businesses does SAO apply to?

A UK company is a qualifying company for an accounting period if, in the previous financial year, the UK company or the UK group had turnover of more than £200 million and/or a balance sheet total of more than £2 billion. Dormant companies also fall within the SAO rules.

What taxes are included in SAO?

The SAO regimes apply to the tax accounting arrangements for the following taxes: 

  • Corporation Tax including Quarterly Instalment Payments; 
  • Value Added Tax; 
  • Pay As You Earn; 
  • Insurance Premium Tax; 
  • Stamp Duty Land Tax; 
  • Stamp Duty Reserve Tax; 
  • Petroleum Revenue Tax; 
  • Customs Duties; 
  • Excise Duties including Air Passenger Duty; and 
  • Bank Levy

What are the deadlines for filing SAO certificates and notifying HMRC?

The deadline for notifying HMRC of the nominated SAO and submission of the annual certificate is the same as the deadline for filing the company’s accounts for the financial year at Companies House. For public limited companies, this is six months after the end of the accounting period. For other companies, this is nine months after the end of the accounting period.

What are the SAO penalties?

There are three types of penalty under the SAO regime: 

  1. failure to notify HMRC of the name of the SAO by the deadline: a penalty of £5,000 is chargeable on the company for its financial year; 
  2. failure to take reasonable steps to ensure the company establishes and maintains appropriate tax accounting arrangements: a penalty of £5,000 is chargeable on the SAO for the financial year; and 
  3. failure to provide a certificate to HMRC for a financial year within the deadline, or it is deemed that the information contains a careless or deliberate inaccuracy to HMRC: a penalty of £5,000 is chargeable on the SAO for the financial year.

 

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Emily Spooner

Director, Business tax

Business tax
London

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