Falling into the Senior Accounting Officer regime for the primary time

The Senior Accounting Officer (SAO) regime types a key a part of any massive UK enterprise’s tax governance and danger administration framework.

Whereas SAO is in the end a compliance requirement – and penalties could also be imposed on each SAOs and firms who fail to conform – it’s additionally a useful software to drive enhancements in key tax processes and methods.

The UK SAO regime covers a spread of taxes and duties, guaranteeing qualifying corporations have sufficient methods in place in order that the proper tax liabilities are reported to HMRC.

Which corporations are affected?

The SAO laws applies to massive UK-registered corporations that within the previous monetary 12 months are both alone, or when its outcomes are aggregated with different UK corporations in the identical group, has:

• a turnover of £200m; or

• a stability sheet complete of greater than £2bn.

Dormant corporations in a gaggle, in addition to energetic ones, should adjust to these obligations. Restricted legal responsibility partnerships alternatively are particularly excluded, as are UK branches of offshore integrated corporations.

Whereas the principles are based mostly on the outcomes of the previous monetary 12 months, it’s potential for corporations to seek out themselves throughout the regime unexpectedly, comparable to following an acquisition. Companies near thresholds, which beforehand haven’t been topic to SAO, must also be cautious of adjustments that may push them into the regime – maybe even attributable to inflationary will increase in pricing – and subsequently one thing which must stored underneath steady overview.

Who ought to the SAO be?

Every qualifying firm should determine who its SAO is. For a gaggle of corporations, there could also be a special one that acts as SAO for every firm. A single particular person may additionally act as SAO for all of the group corporations or a number of individuals can act as SAOs for various components of the group.

It is vital to notice that the function of an SAO can’t be crammed by an agent or be delegated throughout the firm.

Every monetary 12 months, a qualifying firm should notify the identify of its SAO to HM Income and Customs (HMRC). Just one particular person will be SAO at anybody time; nonetheless, an organization can have a couple of filling that place over the course of a monetary 12 months. The enterprise will solely have to notify HMRC as soon as that monetary 12 months has come to an finish.

What are the deadlines for submitting SAO certificates and notifying HMRC?

1. Notification to HMRC?

The deadline for notifying HMRC of the nominated SAO and submission of the annual certificates is similar because the deadline for submitting the corporate’s accounts for the monetary 12 months at Corporations Home. The related closing dates are:

• For a personal firm: 9 months after the top of the related accounting reference interval.
• For a public firm: six months after the top of that interval.

2. Certification to HMRC

The SAO should present a signed certificates to HMRC and should state both that:

• The corporate had acceptable tax accounting preparations all through the monetary 12 months (‘unqualified certificates’), or:
• The corporate didn’t have acceptable accounting preparations all through the monetary 12 months and provides element of the areas the place the preparations weren’t acceptable (‘certified certificates’).

What are the SAO penalties for non-compliance?

There are three potential penalty positions underneath this laws. One is assessable on the corporate, though unusually, two are assessed personally on the person SAO:

• The corporate will be fined £5,000 for failing to inform the identify of the SAO throughout the allowed time;
• The SAO will be fined £5,000 for:

1. Failing to adjust to the primary obligation of sustaining acceptable tax accounting preparations and for failing to offer a certificates on time.
2. Offering a certificates that’s on time however comprises a careless or deliberate inaccuracy.

Every of those penalties is a set quantity of £5,000, so they don’t seem to be insignificant. HMRC through the years has raised penalties on people and firms for failure. Of equal concern is the potential reputational hurt that being topic to a penalty would trigger.

You are actually in SAO regime – What should the SAO do?

An SAO has private accountability for ensuring the corporate takes affordable steps to ascertain, keep and monitor the adequacy of their tax accounting preparations, guaranteeing the manufacturing of correct tax returns and for offering a certificates to HMRC after the top of the monetary 12 months.

They have to additionally determine any areas that don’t meet the necessities and disclose these failures to HMRC as a part of a certification course of.

The SAO should perform their duties on an on-going foundation because the certificates covers the methods, processes and controls in place all through the monetary 12 months. A problem arising on the primary day of the 12 months is as vital for SAO functions as one thing that occurs on the stability sheet date.

Due to this fact, the quantity of labor vital to offer a clear SAO certificates shouldn’t be underestimated and can’t merely be ready on the finish of the monetary 12 months.

We often come throughout organisations that we anticipate are paying the correct quantity of taxes, however from a governance perspective, they’re unable to proof the processes and controls in place to make sure their taxes are appropriately managed. For instance, it is not uncommon for one particular person to arrange the VAT return and their senior colleague to overview it, but nobody has documented the method on how knowledge from the methods is obtained utilized by the enterprise, the vary of changes made when getting ready the return, the checks accomplished guaranteeing the data is correct, the dates by when the return needs to be lodged and when the fee was made.

To totally adjust to the SAO regime, the processes and controls needs to be documented.

Taking this instance a stage additional. It may very well be that the VAT return features a subjective judgment on the VAT legal responsibility of a significant product offered on which the enterprise has taken a view or it may very well be in dialogue with HMRC concerning the acceptable remedy. We’d anticipate the VAT legal responsibility subject to be included on a ‘tax danger register’ that’s periodically thought-about at board stage.

Whereas there’s a sure baseline for all organisations, an additional level to notice is that there have to be an strategy based mostly on the info and circumstances of an organisation. For instance, an organisation that has been throughout the SAO necessities for a decade may very well be anticipated to have a extra advanced set of documented processes and controls than an organisation in its first 12 months.

Last point-interaction with the Enterprise Danger Assessment

The SAO regime is linked to the Enterprise Danger Assessment course of for giant companies. Corporations which can be capable of signal a ‘clear’ SAO certificates – i.e. there are not any points to report – and might reveal to their HMRC buyer compliance supervisor (CCM) the idea upon which that conclusion was reached usually tend to be considered representing a lowered danger relating to firm’s governance and skill to pay the best tax on the proper time. This may lead to much less administration time being spent in coping with HMRC enquires.