Out-Law / Your Daily Need-To-Know

Out-Law Guide 4 min. read

Senior Accounting Officer (SAO) regime

Certain large UK companies must appoint an individual to be their senior accounting officer (SAO) to ensure the company establishes and maintains appropriate tax accounting arrangements to allow tax liabilities to be calculated accurately in all material respects.

SAOs can incur personal fines if they fail to comply with their obligations.

The SAO must give HM Revenue & Customs (HMRC) a certificate each financial year stating whether the company had appropriate tax accounting arrangements. If the company did not have appropriate tax accounting arrangements they must also explain what the shortcomings were. The certificate must comply with certain prescribed specifications and must be unambiguous.

Which companies must appoint an SAO?

A company must appoint an SAO if it is a company incorporated in the UK for the financial year; and it has a turnover of more than £200 million and/or a relevant balance sheet total of more than £2 billion, either alone or when its results are aggregated with other UK companies in the same group, for the preceding financial year.

Dormant companies in a group, as well as active ones, have to comply with the obligations.

Who should the SAO be?

The SAO is the director or officer of a company who, in the company’s reasonable opinion, has overall responsibility for the company’s financial accounting arrangements.

Each qualifying company must identify who its SAO is. Where a group of companies is involved, there may be a different person who acts as SAO for each company, a single person who acts as SAO for all the group companies or several different persons who act as SAOs for different parts of the group.

The role of the SAO cannot be filled by an agent.

Each financial year a qualifying company must notify the name of its SAO to HMRC and must do so separately from the SAO Certificate. Only one person can be SAO at any one time, but the company may have more than one SAO over the course of a financial year. As the company must notify the details of all persons who have been its SAO over the course of a financial year and can supply only one notification for a financial year, it cannot make a notification to HMRC until the financial year has ended.

Public limited companies must notify HMRC within six months after the end of the accounting period. Other companies must notify within nine months after the end of the accounting period.

What must the SAO do?

An SAO’s main duty is to take reasonable steps to ensure that the company establishes and maintains appropriate tax accounting arrangements. As part of this duty, an SAO must monitor the arrangements and identify any respects in which the arrangements fall short of the requirement.

Tax accounting arrangements are the framework of responsibilities, policies, appropriate people and procedures in place for managing the tax compliance risk, and the systems and processes which put this framework into practice.

The tax accounting arrangements must allow for the tax liabilities of the company to be calculated accurately in all material respects.

Reasonable steps are the steps a person in this situation would normally be expected to take to ensure awareness of all taxes and duties for which the company is liable; ensure that risks to tax compliance are properly managed and enable the various returns to be prepared with an appropriate degree of confidence.

The steps that are reasonable will depend on the particular circumstances. Reasonable steps might include establishing and maintaining processes to ensure compliance with legal requirements and periodically checking and testing systems, controls, process flows and transactions.

An SAO would probably be expected to ensure that the introduction of new systems and processes, or changes to them, are supported by appropriate planning, risk assessment, implementation and evaluation activities.

Reasonable steps for an SAO to take would include ensuring the maintenance and retention of required records. An SAO would also be expected to ensure staff and any third party to whom responsibilities are delegated are appropriately trained, have the necessary guidance, qualifications, knowledge and experience needed to carry out their functions.

The SAO must perform the main duty throughout the period of their responsibility. It is not something that they can merely give attention to at the end of a year.

The SAO obligations apply in respect of corporation tax, VAT, PAYE, insurance premium tax SDLT, SDRT, petroleum revenue tax, customs duties, excise duties including air passenger duty and bank levy. Note that they do not apply in relation to national insurance contributions.


A penalty may be charged on a qualifying company if it fails to notify the name of its SAO within certain timescales.

A penalty may be chargeable on an SAO personally if they fail to meet their main duty, fail to give HMRC a certificate within the required timescale, or they provide a timely certificate that contains a careless or deliberate inaccuracy.

Each of these penalties is a fixed amount of £5,000.

A person is not liable to a penalty for a failure to notify details of an SAO, a failure to carry out the main duty, or a failure to provide a certificate on time, if they satisfy HMRC that they have a reasonable excuse for the failure, and they put right the failure without unreasonable delay after the excuse has ended.

A reasonable excuse is normally an unexpected or unusual event that is either unforeseeable or beyond the person’s control, and which prevents the person from complying with an obligation under the SAO provisions. Reasonable excuse does not apply to a careless or deliberate inaccuracy in an SAO certificate.

The February 2020 First-tier Tribunal case of Castlelaw (No 628) Ltd & Irene Douglas v HMRC, which concerned penalties assessed as a result of an accidental failure to notify an SAO or provide a certificate in relation to dormant companies, confirmed that HMRC has a discretion as to whether to assess a penalty for SAO breaches.Following that case HMRC has amended its guidance to say: "A decision to assess an SAO penalty in a particular case should not only consider whether an SAO or company is strictly liable to a penalty, but also take account of the nature of the failure in question, the level of tax risk, whether the failure is symptomatic of any underlying weakness in tax accounting arrangements, and overall compliance including compliance with the SAO regime".

HMRC guidance also says that HMRC will "not normally seek to assess penalties where a group of companies or an SAO omitted details of dormant companies where a risk assessment indicates minimal requirement for tax accounting arrangements". However, HMRC will only consider a company to be dormant for these purposes if it has no profits or income and no assets capable of producing profits, income or gains.

SAO and CRMs

HMRC Customer Compliance Managers (CCMs) will consider whether and how the company / group and the SAO have complied with the SAO provisions as part of the Business Risk Review to determine the company or group's risk rating. For more information see HMRC's Senior Accounting Officer Guidance.

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