Senior Accounting Officer (SAO)

Overview

The Senior Accounting Officer (SAO) regime was introduced in 2009, with a view to ensuring that large companies (broadly, those with a relevant balance sheet total exceeding £2bn and/or a turnover exceeding £200M) take reasonable steps to ensure that “appropriate tax accounting arrangements” are in place.

From an employer compliance perspective, SAO can present some unique challenges. Large employers increasingly operate across multiple jurisdictions, often with complex reward structures, and core compliance processes (e.g. payroll, equity reporting) increasingly outsourced or operated offshore.

To add to these challenges, employment taxes processes and procedures are often spread across various parts of an organisation including HR, reward, tax, finance and payroll. It can therefore be difficult to identify roles and responsibilities and specifically to determine who has ownership of employment tax obligations. A lack of clarity around all of this can lead to increased compliance risk. Furthermore if current systems are not capable of supporting the employment tax function this can increase the level of compliance risk, leading to compliance failures.

All of this means that the management of employment taxes compliance is more complex than it may have been in the past and it is important to regularly assess that suitably robust process and procedures are in place.

Employer compliance issues that can impact SAO reporting

Inherent risks

• A business with a group structure where there is no central employment tax management or oversight.
• Rapid growth businesses where the employment taxes compliance infrastructure has not been able to keep up with the speed of growth in the business.
• Mature businesses with an internationally mobile workforce and complex remuneration structures.
• A lack of training, or appropriate skills/knowledge across those individuals responsible for employer compliance operations.

Process risks

• There are no documented employment tax policies and procedures in place.
• Staff inputting data are not adequately trained to understand the tax impact of data being incorrectly classified.
• No central control framework - no one person taking ownership for overall compliance across the entire spectrum of employment taxes.

Systemic risks

• Lack of automation in the employer compliance process and lots of manual input required.
• IT systems are unable to provide sufficient functionality e.g. a new accounting, or payroll system not being tax sensitised.
• No monitoring or oversight of systems, and no ongoing review of systems against legislative changes.

Our advice

Be prepared. In our experience HMRC are increasingly focusing on how Senior Accounting Officer’s determine whether there are appropriate tax accounting arrangements in place in their organisation, particularly around employment tax matters. Our team can provide insight and support either as part of a standalone employment tax solution or as part of a cross tax project.