HMRC takes limited action on SAO regime

In 2009, the senior accounting officer (“SAO”) rules were introduced, requiring the most senior financial officer for a company or group of companies to file an annual certificate to HMRC personally certifying all the tax accounting arrangements were in place for the year. 

The motivation for this was political – at £5,000, the associated penalties are relatively small, and any inaccuracy would almost certainly be caught under other regimes. But these penalties can be levied on the individual, as well as the business – making the top finance leader personally responsible for tax accounting arrangements.

The SAO regime applies to businesses with a turnover of £200m or more or a balance sheet of £2bn or more – HMRC expects this will be the largest 2,000 UK businesses. The practicalities are simple – a combined notification and certificate filed once a year. The certificate can either be unqualified (clean) or qualified – notifying there were issues with tax accounting arrangements in the year. 

Advisers and businesses may have long suspected HMRC does very little with the information they receive in these certificates. RSM UK’s recent freedom of information request to HMRC shows there have been fewer than five penalties in the last five years to individuals who have failed to perform their main duty, and fewer than 10 for careless or inaccurate certificates. 

In total, about 410 penalties were levied. Around 400 of these were for the more basic failure to provide the certificate at all (for the individual) and for the company or group in question failing to notify who the individual CFO was (for the business).

In total, about 410 penalties were levied. Around 400 of these were for the more basic failure to provide the certificate at all (for the individual) and for the company or group in question failing to notify who the individual CFO was (for the business).

Anecdotally, those of us working with the individual SAOs in question find the personal responsibility element in this regime can have a powerful effect on individuals. However, HMRC does need to take the regime seriously in order to expect CFOs to also do so.