The Senior Accounting Officer: A guide
Background
Schedule 46 of the Finance Act 2009 contains the Senior Accounting Officer (SAO) provisions for certain large companies.
These provisions are aimed at improving compliance across a number of tax regimes. They apply to the financial year of a ‘qualifying’ company rather than any specific accounting period.
A company must meet conditions to be a qualifying company. It must be incorporated in the UK, and it must exceed a minimum turnover or balance sheet total for the preceding year. If it is a group company, there are rules for aggregating turnover or balance sheet totals of fellow UK subsidiaries (see below).
A qualifying company must identify the person who is its SAO as defined by the legislation and notify the name of that person to HMRC within certain timescales.
The SAO must carry out a main duty which is to ensure the company establishes and maintains appropriate tax accounting arrangements to allow tax liabilities to be calculated accurately in all material respects.
The SAO must also give HMRC an annual certificate 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.
A penalty will be chargeable;
• on a qualifying company if it fails to notify the name of its SAO, or
• on the SAO if they fail to meet their main duty (though an SAO may escape a penalty if they have made reasonable efforts to rectify shortcomings), or
• on the SAO if they fail to give HMRC a certificate within the required timescale, or they provide a timely certificate that contains a careless or deliberate inaccuracy.
A person may appeal against a penalty. If appropriate that appeal may be heard by the tribunal.
Definition
A Senior Accounting Officer (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 and a company can only have one SAO at any stage.
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.
Qualifying company
For a company to be qualifying and therefore captured by the SAO provisions, the company must:
1. Be incorporated in the UK
2. Have a turnover of more than £200 million and / or
3. A balance sheet total of more than £2 billion
Where a company is a member of a group, those responsible must aggregate its turnover and / or balance sheet totals with those of other UK companies in the same group (51% sub rule).
It is possible for a company to be a qualifying company in one financial year, not a qualifying company the year after, then a qualifying company again the year after that and so on.
Whether or not a company is tax resident in the UK is not relevant for the purpose of the Senior Accounting Officer legislation as the legislation is based upon the country of incorporation and not the territories in which it operates.
Excluded companies
The following are not qualifying companies:
• Partnerships (LLPs, LLCs and general partnerships)
• Crown estates
• Public bodies
• Building societies
• Industrial and provident societies
• Co-operative and Community Benefit Societies
• Foreign-incorporated companies
• Foreign-incorporated companies that are UK resident by virtue of central management and control
• UK permanent establishments of foreign companies
• Controlled foreign companies.
However, any of these entities may own companies which meet the qualifying company conditions for Senior Accounting Officer purposes.
Responsibilities
The main duty of a Senior Accounting Officer (SAO) is to take reasonable steps to
• monitor the accounting arrangements of the company and
• identify any respects in which those arrangements are not appropriate tax accounting arrangements.
Notifying HMRC
A qualifying company must notify the name of its SAO to HMRC in writing. It must make a separate notification for each financial year for which it is a qualifying company.
The company can supply only one notification for a financial year. This means that it cannot make a notification to HMRC until the financial year has ended.
A group of companies may choose to make combined notifications of SAO details for all of the companies in the group.
The company must notify HMRC
• by the date it has to file its accounts for the same financial year at Companies House as determined by the Companies Act 2006 (PLC 6ms, LTD 9ms) or
• by any later time as allowed by HMRC.
A company should know who its SAO or SAOs were the day after the end of the relevant financial year. So, a company should normally have no difficulty in notifying by the time limit which is determined by the accounts filing day.
If the company fails to notify the SAO details to HMRC by the end of the allowed period, it will be liable to a penalty of £5,000.
There is no set form of notification. However, the company must provide written details to HMRC of
• the financial year to which the notification relates
• the name of the person who was or persons who were its SAO in the financial year
• the period within the financial year in which they were the SAO
• sufficient information to allow HMRC to contact that person or persons
• the company/ companies for which the SAO was acting.
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