Senior accounting officer: the essential guide to HMRC compliance

As businesses grow in size and complexity, HMRC’s compliance expectations go beyond the accuracy of tax returns to the effectiveness and reliability of the systems, processes and controls that sit behind these returns. Against this backdrop, the Senior Accounting Officer regime was introduced, which holds an appointed senior executive (the Senior Accounting Officer) personally responsible for ensuring that the company establishes and maintains adequate tax accounting arrangements to enable it to make accurate tax returns.

Who does the Senior Accounting Officer regime apply to?

A UK company falls within the scope of the regime if, in the preceding financial year, it had:

• An annual turnover of £200m; and/or
• A balance sheet total of more than £2bn.

These thresholds also apply to UK companies within a group, based on aggregated figures.

A qualifying company must appoint a Senior Accounting Officer, who has overall responsibility for the company or group’s accounting arrangements. The role cannot be outsourced or performed by an agent.

What are the duties of the Senior Accounting Officer?

The Senior Accounting Officer is personally accountable for taking reasonable steps to ensure that the company’s tax accounting arrangements are robust enough to allow its tax liabilities to be calculated accurately. The taxes in scope include PAYE, corporation tax, VAT, customs duties, and stamp taxes. This means developing or maintaining procedures to ensure compliance with legal requirements, and periodic monitoring and testing of the company’s governance, processes and transactional flows. The SAO is then expected to oversee the design and introduction of new measures, or changes to existing ones, to address any control failures, reduce errors and minimise risks.

At the same time, the Senior Accounting Officer would be expected to seek external advice where expertise is not available internally. They must also ensure that any staff and third party responsible for managing tax accounting and compliance have the appropriate training, knowledge and experience required to perform their functions. Moreover, they must ensure the maintenance and retention of required records to support the company’s tax filings or evidence its ongoing tax governance.

What are the key compliance requirements?

For each financial year, the Senior Accounting Officer must provide a signed certificate to HMRC stating that the company’s tax accounting arrangements have been adequate throughout the year. If this is not the case, they must give a qualified certificate and an explanation of the ways in which the arrangements were not appropriate.

For each financial year, a qualifying company must also notify HMRC of the name of the person who was its Senior Accounting Officer at any time of the year. This notification must be made by the company’s statutory accounts filing deadline, typically 6 to 9 months after the end of the financial year.

What are the penalties for non-compliance?

A personal penalty of £5,000 can be imposed on the Senior Accounting Officer for failure to comply with their main duties, failure to provide a certificate, or submission of an incorrect certificate. A penalty of £5,000 can likewise be issued to the company for any failure to notify HMRC of its Senior Accounting Officer.

Failures can be deemed by HMRC to be indicative of wider issues with the company’s governance. HMRC can therefore place the company under closer scrutiny and increase the company’s tax risk rating under its Business Risk Review process.

How can AAB help?

Compliance with the regime is not a one-off tax audit exercise. It demands an ongoing and proactive assessment of the company’s governance and processes, and diligent refinement and enforcement of its internal controls to ensure they remain effective as the business evolves.

Whether your business falls within scope for the first time or has had a Senior Accounting Officer for several years, AAB’s tax team can provide tailored support to help you meet your obligations. We can help you:

• Conduct Senior Accounting Officer readiness reviews to benchmark existing practices against HMRC expectations.
• Perform detailed health checks to review and map the company’s governance frameworks, policies and procedures, identifying any deficiencies or failures.
• Implement a tax risk register to track risks and recommend remediation actions.
• Design and implement controls to resolve identified weaknesses and minimise risks.
• Conduct periodic health checks to ensure continued compliance.
• Deliver relevant training to your finance and tax teams.
• Prepare documentation, including formalised tax process maps, best practices guidelines, and recommended control framework and review procedures.

If you would like to understand the regime more or discuss your compliance obligations, please get in touch with Erica Fitchie, Gillian Forrest or Edwin Goi.