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The Senior Accounting Officer (SAO) regime is a critical compliance requirement for large UK companies. It places personal accountability on designated individuals to ensure robust tax accounting arrangements are in place, supporting accurate calculation and reporting of tax liabilities. Qualifying companies must notify HMRC of their SAO and submit an annual certificate confirming compliance or disclosing shortcomings. Both companies and SAOs face fixed penalties for failures, with limited scope for mitigation. With HMRC’s increasing focus on governance, accountability and tax risk management, understanding and meeting these obligations is essential.
Who is in scope
The SAO regime applies to UK incorporated companies (it is the place of incorporation and not the place of the ultimate ownership, permanent establishment or trade that is important) that meet either of the following thresholds in the preceding financial year:
- turnover exceeding £200 million;
- or a balance sheet total over £2 billion.
For group companies, turnover and/ or balance sheet totals must be aggregated to determine whether it is a qualifying company. Each company must consider its own financial year, and where year ends differ, careful analysis is required. Notably, open-ended investment companies (OEICs) and investment trusts fall outside the regime, as do partnerships, building societies, and UK permanent establishments of foreign companies.
The main duty
The SAO must take reasonable steps to ensure the company establishes and maintains adequate tax accounting arrangements which allow for the tax liabilities of the company to be calculated accurately. They must cover the end-to-end process from the initial data input into accounting systems to arriving at the numbers which form the basis of the company tax return.
This includes:
- Implementing a framework of responsibilities, policies, appropriate people and procedures in place for managing the tax compliance risk.
- Ensuring systems and processes are in place to accurately gather, record and process data for tax reporting.
- Designing controls to mitigate risks which could include making and documenting sensitive tax judgements, delegating tasks to staff or engaging third parties and separating responsibilities.
- Ongoing monitoring of the arrangements and identifying any aspects where the arrangements fall short. The level of monitoring will vary according to the level of risk present. This is an ongoing process throughout the financial year and is not something that can be looked at once annually. If the SAO changes mid-way through a financial year the SAO will remain responsible for the tax and accounting arrangements that were in place during their time as the SAO.
Crucially the duty cannot be delegated, making the designated individual personally accountable for the company’s tax compliance framework during their tenure.
Notification and certification requirements
Notification
A company must notify HMRC of the name of the person(s) acting as its SAO for each financial year for which it is a qualifying company. The notification must include written details (verbal notification is not permitted) of:
- the company/companies for which the SAO was acting;
- the financial year to which the notification relates;
- the name and contact details of the person/(s) who were its SAO in the financial year; and
- the period within the financial year which they were the SAO.
A company in administration or liquidation will still be expected to notify its SAO details to HMRC.
There is no requirement for a company to notify HMRC that it is a non-qualifying company for a financial year, even if it has been a qualifying company in a preceding financial year.
Certification
An annual certificate must be submitted to HMRC, either confirming compliance (“unqualified”) or disclosing any shortcomings (“qualified”). The certificate must be provided to HMRC within the following timeframe:
- Public Companies: within six months of the end of the financial year
- Private Companies: within nine months of the end of the financial year
Penalties
A fixed £5,000 penalty can be levied for each financial year on:
- the company for their failure to notify HMRC of its SAO;
- the SAO who failed to provide a timely certificate, or provides a certificate that contains a careless or deliberate inaccuracy; or
- the SAO for the failure to meet the main duty.
A penalty will not be assessed if the SAO has already suffered a penalty in relation to another group company for a similar failure for a corresponding financial year, or if any other SAO has provided a certificate in respect of that company for that financial year.
HMRC’s time limits for assessing penalties are:
- 6 months after the failure or inaccuracy first comes to HMRC’s attention; or
- 6 years after the end of the period for filing the company’s accounts for the financial year with Companies House.
Mitigation or reasonable excuse?
There is no penalty reduction available for any reason; however, it is a defence to prove that the company had reasonable excuse for its breach. A person might have a reasonable excuse where something happens that stops them from meeting their obligation despite them taking reasonable care. This is a very high bar. In particular:
- reliance on others is rarely accepted as a reasonable excuse.
- a reasonable excuse does not apply to a penalty for careless or deliberate inaccuracies in a certificate.
Even if a person is liable to a penalty, HMRC have the discretion over whether to assess that penalty. HMRC should consider all relevant facts, including the nature of the failure and the inherent compliance risk when deciding whether to exercise their discretion.
HMRC approach and best practice
HMRC is increasing its focus on overall governance, accountability and management of tax risk within a business’ tax compliance framework. Although HMRC’s guidance does not refer to a company’s Corporate Criminal Offence (CCO) policy and risk assessment, it is anticipated that HMRC will take a holistic approach to risk assessment by considering both the company’s fulfilment of its main duty under the SAO regime and its CCO arrangements. A deficient CCO policy is likely to contribute to a high-risk classification and more intense scrutiny of the SAO’s work.
HMRC’s Large Business unit allocates a Customer Compliance Manager (CCM) to qualifying companies, who will seek to understand and assess the company’s tax risk and review SAO compliance. The CCM will expect the SAO to:
- fully understand what the SAO role entails and have a sound understanding of what constitutes appropriate tax accounting arrangements;
- have considered the level of tax risk and tailored monitoring and controls accordingly;
- ensure that staff and third parties are adequately trained and supported;
- maintain thorough documentation of key decisions and sought professional advice where appropriate; and
- regularly review systems and controls to ensure the suitability and efficiency of ongoing compliance and proactively address document gaps or inconsistent processes.
For companies that are required to or voluntarily comply with the UK Corporate Governance Code, the SAO may also be expected to support the Board when declaring the effectiveness of compliance controls under Code Provision 29. For more, see our Tax Journal article on the requirements that apply for financial years commencing after 1 January 2026.
The application of the SAO regime can be challenging, particularly in the context of complex group structures, mergers, and acquisitions. We can assist with all aspects of SAO compliance, including assessing whether your business is or has been within the scope of the SAO regime, supporting you in your interactions with HMRC, and advising on the design and implementation of effective tax accounting arrangements and monitoring processes.
