Becoming a Senior Accounting Officer (SAO) – key things you need to consider

When considering the responsibilities of an SAO, it is useful to go back to the original intention of HMRC when introducing the regime – to drive improvements in key tax processes and systems and to encourage top-level commitment to tax compliance. The regime forms a key part of any large business’ tax governance and risk management framework. As an SAO, you are responsible for:

• Ensuring that the company takes reasonable steps to establish and maintain appropriate tax accounting arrangements. Tax accounting arrangements cover the end-to-end process from the initial data input into accounting systems to arriving at the numbers which form the basis for completion of the tax returns.
• Certifying to HMRC whether appropriate tax accounting arrangements are in place by the relevant deadline (9 months after the end of the accounting period for a private company or 6 months after the end of the accounting period for a public company).

According to HMRC’s guidance¹, the SAO should:

• Ensure compliance with legal requirements
• Periodically check and test systems, controls, process flows and transactions
• Ensure that the introduction of new systems and processes, or changes to them, are supported by appropriate planning, risk assessment, implementation and evaluation
• Ensure the maintenance and retention of documentation
• Ensure staff and any third party to whom responsibilities are delegated are appropriately trained, and have the necessary guidance, qualifications, knowledge and experience needed to carry out their functions

The SAO legislation describes an SAO as the director or officer who in the company’s reasonable opinion has overall responsibility for the company’s financial accounting arrangements. “Officer” has the meaning under the Companies Act, which is defined as including a director, manager or (company) secretary.

One person can act as SAO for all companies in a group or several people can act as SAOs for different parts of a group of companies. The role of an SAO cannot be filled by an agent or be delegated within the company.

We recommend that the SAO is someone with good company oversight and should be sufficiently competent in the company’s financial and tax matters to ensure that the company’s tax accounting arrangements are appropriate and compliant. It is common for a Chief Financial Officer or Finance Director to be nominated as the SAO.

The appointed SAO takes on a significant responsibility and potentially personal liability when it comes to certifying to HMRC each year, therefore it is important to watch out for the following common challenges:

1. Automate your tax processes where appropriate: Manual tax processes can be open to error – the use of specialist tax systems can help prevent these from occurring.
2. Document your tax risks, processes and controls:  This can provide the business with a strong framework to aid with testing and review as well as prioritising key areas to address.
3. Encourage knowledge development: Encourage tax training for individuals who are responsible for tax processes e.g. in Finance or HR teams.
4. Seek advice: Ensure appropriate tax advice is taken with respect to any uncertain or subjective areas and this advice is documented. Not all errors warrant a qualified certificate and it may be helpful to discuss this with an adviser.
5. Be prepared: Ensure the business is prepared for certification and certifies by the deadline to avoid penalties. If the business is acquisitive, ensure any newly acquired qualifying companies are included on the certificate.

The SAO should provide a qualified certificate if the company did not have appropriate tax accounting arrangements in place throughout the financial year.

It is for the SAO to consider whether any shortcomings or areas for improvements were not appropriate. We recommend the SAO asks themselves the following questions when reviewing any shortcomings/errors during the period and whether they warrant a qualified certificate:

• What is the value of the error from a tax perspective and how material is it in the context of the business?
• Was the error a one-off or ongoing (which may indicate there are shortcomings in the process/system)?
• Why did the error occur and how was it identified?
• Were reasonable checks/monitoring in place?
• Has the error been rectified and how? 

Our specialist team can support you with:

1. Preparing or reviewing notifications and certificates, advising on appropriate disclosures if necessary
2. Identifying qualifying companies and relevant periods
3. Carrying out an SAO ‘health-check’ to review existing tax controls and processes and evaluate potential risks and opportunities
4. Implementation of SAO governance framework, including the preparation of detailed process maps of key tax processes
5. Introducing methods to help track SAO compliance and serve as documentary evidence for HMRC e.g. implementing an SAO checklist which tests the relevant processes and controls in place

If you have any questions or would like to discuss the SAO regime or how we can support on tax risk and governance more generally, please contact Janaissa Eaglestone.

[1] - SAOG14410 - Senior Accounting Officer main duty: reasonable steps:  https://www.gov.uk/hmrc-internal-manuals/senior-accounting-officers-guidance/saog14410 

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