Senior Accounting Officer sign-off

Taking reasonable steps

Under the Senior Accounting Officer (SAO) legislation, introduced in Finance Act 2009, the individual responsible is required to personally certify that their company systems are fit for the purpose of reporting taxes. HMRC has issued revised guidance since then about the practical application and provides greater clarity on the more challenging aspects of the rules, including the circumstances in which penalties might be levied.

The information below provides some key points to consider and our team would be happy to discuss these in more detail with you.

Legislation - what are the rules?

Main duty: SAO to take reasonable steps to ensure that the business establishes and maintains appropriate tax accounting arrangements;

Other responsibilities: SAO to submit an annual certificate stating whether the business had appropriate tax accounting arrangements throughout the financial year and, if not, why not.

Company to notify HMRC annually as to the identity of the SAO for all relevant companies for the relevant financial year.

Actions for groups new to SAO

The first actions are to appoint an SAO and assess the appropriateness of the current tax accounting arrangements. Once an assessment is complete, further work can be focused accordingly to make improvements where necessary.

If you and your SAO are happy that a clean certificate is appropriate, you should document this decision and the rationale that supports it including the sources of confidence that the SAO has taken 'reasonable steps'.

If there are issues you have determined to be materially undermining your tax accounting arrangements, you should develop a plan to address these. It could not only expose the SAO to the financial and reputational penalties of an SAO failure but also the business to penalties under the company penalty regime.


Producing documentation to support compliance

  • Ensure documentation fits with existing materials, group policies and procedures  
  • Think about the target user/audience as this will determine the style of the content. Is the user a corporate tax user or finance assistant?
  • Make sure your team are aware of the importance of the documentation/guidance and that the latest version is available to all
  • Don't produce materials that are unwieldy  or likely to be rapidly  outdated
  • Don't miss the opportunity to identify areas of improvements  when documenting your tax  arrangements 


What to disclose in the SAO certificate?

Identified errors - where it has been identified that appropriate tax accounting arrangements are not in place throughout the financial year and these have resulted in material inaccuracies in calculated tax liabilities.

Control weaknesses that are likely to have resulted in an error - where appropriate tax accounting arrangements were not in place and these are likely to have resulted in material inaccuracies although the nature/extent of the inaccuracy may not have been confirmed. 


In all material respects? 

The SAO legislation defines 'appropriate tax accounting arrangements' which enable tax liabilities to be calculated accurately in 'all material respects'.

Given the legislation does not import its own definition of materiality for taxes; we may assume that the same standard of care applies as under pre-existing tax law. It makes sense to extend your sense of 'material' in the context of voluntary disclosures to HMRC, to SAO. You and your CRM may wish to reach a mutual agreement of 'materiality' by tax.

Actions for groups who have been in SAO for some years

Invest in ongoing monitoring, assurance and improvement

  • Confirm roles and responsibilities - those responsible should know who they are and what they are responsible for
  • Maintain regular training and guidance - offer appropriate training to understand the overall objectives of tax management and their role
  • Perform periodic internal self-assessment and sign-off  to confirm that objectives have been met and if not, provide details
  • Periodically review and test controls - such assertions and underlying evidence could be subject to independent review
  • Keep tax strategy and policy up to date and maintain a link from this into all those responsible for tax 
  • Certify and disclose to HMRC - internal sign-off and disclosures can be collated to support the external certificate.
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