Essential Guidance for CFOs, Finance Directors, Heads of Tax

Introduction

This article provides an overview of the Senior Accounting Officer (SAO) legislation, designed to inform those who may be impacted. It covers key definitions, legislative requirements, the range of taxes involved, the importance of robust internal processes, potential penalties for non-compliance, and how SAO interacts with Business Risk Reviews (BRR). 

Background to SAO Legislation

The SAO regime was introduced by Schedule 46 of the UK Finance Act 2009 and came into effect for financial years commencing on or after July 21, 2009. Its primary rationale is to increase corporate accountability for tax compliance amongst large companies. By requiring a named senior official to take responsibility for the accuracy of tax accounting arrangements, the legislation aims to reduce tax risk and ensure that companies have effective controls in place to meet all relevant tax obligations.

Qualifying Company and Group Position

A “qualifying company” is, broadly, a UK-incorporated company, as defined by the Companies Act 2006, with a turnover exceeding £200 million or a relevant balance sheet total of more than £2 billion. These thresholds are assessed on a group basis, meaning the aggregate figures for all UK group companies within a 51% group are considered. This ensures that groups with significant UK operations are brought within the scope of the SAO regime, not just standalone entities.

It is important to note that the SAO requirements apply to each individual qualifying company within a corporate group. 

Who Should Be the SAO?

The legislation requires that the SAO must be a director or officer of the company who has overall responsibility for the company’s financial accounting arrangements. In practice, this is typically the Chief Financial Officer (CFO), Finance Director, or another senior finance executive. The SAO must have sufficient knowledge and authority to ensure that appropriate tax accounting arrangements are in place and maintained.

Where a company is part of a group, each qualifying company must appoint its own SAO. The same individual may act as SAO for multiple companies if appropriate, provided they have the necessary oversight and control.

Requirements of the Legislation

The SAO legislation imposes several key obligations on qualifying companies and their appointed SAOs:

• Identify the SAO:  the Company must notify HMRC of the name of the appointed SAO annually.
• Ensure Appropriate Tax Accounting Arrangements (the ‘main duty’):  The SAO is required to ensure that the company establishes and maintains appropriate tax accounting arrangements to enable materially accurate tax returns and timely payments.
• Annual Certification: The SAO must provide an annual certificate to HMRC (see below).

Deadlines for Filing and Types of Certifications

Each qualifying company must submit its SAO notification and certificate no later than the end of the period that is allowed by the Companies Act 2006 for filing the company’s accounts for the financial period. For most companies this is nine months after the year end; 6 months for PLCs. Timely submission is crucial to ensure compliance and avoid potential penalties.

The SAO may submit either an unqualified or qualified certificate:

• Unqualified Certificate: This confirms that the company maintained appropriate tax accounting arrangements throughout the financial year and that, to the best of the SAO’s knowledge, there were no deficiencies.
   
• Qualified Certificate: This is issued if the SAO identifies deficiencies in the company’s tax accounting arrangements during the financial year. The certificate must specify the nature of these deficiencies and should outline any remedial actions taken or planned. Filing a qualified certificate does not necessarily mean that penalties will be applied, but it does highlight areas that require attention and may trigger further HMRC scrutiny.

Taxes Covered by the SAO Regime

The scope of taxes covered by the SAO regime is broad and includes, but is not limited to:

• Corporation Tax (including Quarterly Instalment Payments and any amount assessable as if it were CT)
• Value Added Tax
• Pay As You Earn
• Insurance Premium Tax
• Stamp Duty Land Tax
• Stamp Duty Reserve Tax
• Petroleum Revenue Tax
• Customs Duties
• Excise Duties including Air Passenger Duty
• Bank Levy

A particular point of emphasis is that the headline taxes shown above encompass many underlying elements (e.g. transfer pricing, R&D claims, off-payroll workers, expense systems, export evidence etc.). A comprehensive understanding of all tax obligations is therefore essential.

Practical Considerations

Companies subject to the SAO regime should ensure robust tax governance frameworks are in place.

This includes clear documentation of tax processes, appropriate training of relevant staff, risk assessments, and regular review of controls. The SAO should work closely with internal audit and tax teams to monitor compliance and address any deficiencies promptly.

Penalties for Non-Compliance

Failure to comply with SAO requirements can result in penalties, both for the company and the individual SAO. Penalties include:

• Failure to Notify HMRC of the SAO: £5,000 per relevant financial year, imposed on the Company.
• Failure to Provide the Annual Certificate: £5,000 per relevant financial year, imposed on the individual SAO.
• Failure to Take Reasonable Steps: £5,000 per breach, imposed on the individual SAO.

These penalties are cumulative and may be imposed for each separate failure. 

SAO and Business Risk Reviews

Businesses with a dedicated HMRC Customer Compliance Manager (CCM) and subject to Business Risk Review can expect to be questioned on their approach to the SAO legislation. Companies should be able to demonstrate compliance, and evidence the work carried out to support the SAO filing position.

How A&M Can Help

Alvarez & Marsal (A&M) offers a flexible, integrated approach to SAO compliance, tailored to the specific needs of each organisation. Our team of experienced professionals can:

• Review existing SAO compliance processes and benchmark to best practice
• Carry out full or partial SAO reviews to support certificate submission
• Advise on the nature of the certificate to be submitted (qualified/unqualified)
• Develop/review Tax Risk and Control Matrices
• Provide training and guidance for SAOs and finance teams
• Produce process flow diagrams and/or guidance notes
• Design and/or implement key control testing plans

By partnering with A&M, companies benefit from practical, hands-on support that addresses both the letter and the spirit of the SAO legislation. Our integrated approach ensures that organisations not only meet their obligations but also embed best practice tax governance for the long term.