Tax governance is at the heart of managing tax risk for large businesses, and HMRC holds it to a high standard. The Senior Accounting Officer (SAO) regime is a crucial part of that framework, ensuring that large companies take responsibility for maintaining robust tax accounting systems. Through the self-assessment approach, HMRC expects the company, whether it’s a group arrangement or a single entity, to take the relevant steps to meet SAO requirements.
The SAO regime spans a variety of taxes and duties, ensuring that large companies take reasonable steps to maintain “appropriate tax accounting arrangements.” Failure to comply can result in significant penalties for both the SAO personally and the company. Reputational damage for both can also potentially occur.
While compliance is key, the SAO regime offers a chance to enhance your financial processes. We can help you meet your obligations under the SAO regime and potentially unlock added value along the way which could lead to tangible commercial value.
WHO IS AFFECTED BY THE SAO REGIME?
UK companies must appoint an Senior Accounting Officer if, either alone or when its results are aggregated with other UK companies in the same group, for the previous financial year:
- Turnover exceeds £200 million and/or
- Balance sheet total exceeds £2 billion
WHAT DEADLINES SHOULD YOU BE AWARE OF?
The nominated company must submit a notification and certificate to HMRC no later than the accounts filing deadline for the financial year. This is usually 6 months after the year-end for listed companies and 9 months after the year-end for non-listed companies.
- Notification – telling HMRC who the SAO will be
- Certificate – notifying HMRC that the SAO considers the processes and procedures to be sufficient to deliver accurate tax returns or disclose any specific risks that are identified
Depending on whether or not the SAO deems the tax accounting arrangements to be appropriate during the year, either a qualified or unqualified certificate will be submitted. Cooper Parry can support by providing the wording of both the notification and certification in an HMRC-approved format.
WHAT ARE THE PENALTIES FOR NON-COMPLIANCE?
3 different penalties may be applied for non-compliance, each of which is fixed at £5,000. They are either chargeable on the corporate entity or the Senior Accounting Officer individual personally.
HOW CAN COOPER PARRY SUPPORT YOU?
Fundamental to compliance is the implementation of a framework allowing the SAO to both manage risk and ultimately sign off on the annual certification. Typically, our approach to such projects is to hold a detailed SAO workshop which covers:
- SAO “training” to the SAO and wider teams (e.g., finance team, HR).
- Detailed individual tax sessions, using our relevant specialists on site. This will cover all tax areas such as corporation tax, employment tax, indirect taxes – all that are within the remit of SAO. This ensures we all have a clear view of the current tax environment. The business will then be clear on any specific risk areas that need to be considered from an SAO perspective. You’ll know what needs to be implemented to manage the risk areas appropriately (if any).
Following the workshop, we’ll prepare and issue draft tax risk registers, covering each of the above areas. These effectively become your road map to implementing the SAO framework (a suitable framework being central to strong SAO governance). The tax registers are prepared in a format which allows succinct and timely updates. They’ll also be easy for the business to follow. We can also offer support with dealing with certain actions or opportunities that come out of the workshop (separate from the SAO project itself).
We’ll assist in preparing the required documentation to support both the notification and certification in advance of the reporting deadline. The SAO is responsible for ensuring that the tax accounting arrangements and systems are monitored throughout the year and the risk registers are updated on a real-time basis. It’s also important to ensure that issues relating to tax governance, including SAO, are discussed at the Board level regularly.
We strongly recommend starting the process early to ensure your policies and procedures are firmly in place. Our multi-skilled tax team is always ready to help, so if you have any questions or need support get in touch.
