Senior Accounting Officer Regime: what you need to know
Senior Accounting Officer Regime: what you need to know
The Senior Accounting Officer (SAO) regime sets the benchmark by which the tax accounting arrangements of large UK companies are assessed.
SAO legislation places personal responsibility on a qualifying company’s appointed Senior Accounting Officer for ensuring that for each financial year, tax accounting arrangements are robust and the underlying people, processes and technology are structured to assure the submission of materially accurate tax returns.
The legislation was introduced to increase levels of personal accountability for tax governance, and the regime has changed the way that tax is managed. It is at the centre of how HMRC assess large businesses and the level of risk they pose to the Exchequer. HMRC’s expectations of what acceptable governance looks like has also continued to evolve, and what was considered acceptable when the legislation was first introduced is certainly not what is expected now.
Understanding the SAO regime is essential for maintaining good corporate governance and avoiding penalties.
What is the Senior Accounting Officer threshold?
UK incorporated companies with turnover of greater than £200 million and/or a relevant balance sheet total of more than £2 billion for the preceding financial year qualify for the SAO regime. Companies qualify either based on their own turnover/balance sheet amounts , or as a member of a group (the turnover and balance sheet totals are the aggregated amounts of all UK incorporated companies within a 51% group)
Care is needed when applying these tests, especially for large multi-national groups with autonomous sub-groups which may not have full visibility over the results of all group members ; where accounting periods differ within groups; and particularly for fast-growing businesses (either through organic growth or M&A activity).
Qualifying companies are required to nominate a Senior Accounting Officer and formally notify HMRC who the SAO is for each financial year that the company is qualifying. The notification deadline aligns with the company’s deadline for filing its financial statements with Companies House.
Senior Accounting Officer responsibilities
The Senior Accounting Officer is responsible for ensuring that the company establishes and maintains appropriate tax accounting arrangements and ensuring that tax submissions are materially accurate.
SAOs must oversee the design, implementation, monitoring and testing of processes and controls, underlying systems, and technology, as well as ensure suitable skills and availability of those managing relevant tax processes. It also requires ongoing governance, control assessment and tax risk management.
At the same time as the qualifying company notifies HMRC of the identity of its SAO, the SAO must provide a signed certificate to HMRC stating whether the company had appropriate tax accounting arrangements in place for each qualifying financial year. SAOs need to maintain suitable documentation and evidence of the basis for each certificate.
If any deficiencies are identified, the SAO must take corrective action and may need to report these issues to HMRC through the certificate. This promotes transparency and accountability between the company and HMRC and ensures that the company remains accountable for dealing with any deficiencies it identifies.
Senior Accounting Officer deadlines
As above, both the SAO notification and certificate filing deadlines align with Companies House requirements for financial statements - typically nine months following the end of the company’s financial year (or six months for PLCs). It is crucial for the company and the SAO to meet this deadline to avoid penalties and demonstrate the company’s commitment to maintaining compliant tax accounting practices.
SAO penalties
There is a penalty of £5,000 chargeable on the company for failure to notify HMRC of the identity of its SAO within the required timeframe.
There is a personal penalty of £5,000 on the SAO for failure to maintain appropriate tax accounting arrangements.
Additionally, there is a personal penalty of £5,000 on the SAO for failing to submit a certificate to HMRC by the deadline or submitting an incorrect certificate.
Penalties can be waived if there is a reasonable excuse, and HMRC can apply discretion in some circumstances, but there is a rigorous process for considering ‘reasonable excuse’ submissions.
Have you missed a filing deadline? Unsure how to report tax inaccuracies? Find out how our team of SAO experts can help.
Questions for a Senior Accounting Officer
Your company’s approach to SAO legislation can transform your relationship with HMRC. It is a key consideration in HMRC’s Business Risk Review process, and can strengthen your tax operations. But what are the questions that need to be asked by an SAO when carrying out this role?
- Do I need to get external support before I file my SAO notification and certificate?
- What do I need to underpin my certificate? What work needs to be done before I can form my opinion?
- How do I demonstrate that my company has established and maintained appropriate tax accounting arrangements?
- I had a tax error; do I need to include it on my certificate?
- Do I need a tax risk register?
- Do I need to conduct SAO testing and does this need to be formally documented? Do I need people to attest to the effectiveness of the controls that they operate?
- Will HMRC ask for evidence of such testing having taken place?
- Might my SAO approach be considered in due diligence?
- How do I benchmark my company to get comfortable that what I am doing is reasonable?
How we can help
Our SAO assurance services can be tailored to suit your needs - there is no ‘one-size fits all’ approach. SAOs must be able to demonstrate that their in-year governance and the process underpinning their year-end assessment meet the requirements of the legislation. We can support you with a unique Internal Audit approach to form clear and confident SAO conclusions, working with your business and SAO to support their responsibilities.