Senior Accounting Officer (SAO) Duties

Introduction

Is your recruitment agency impacted by the Senior Accounting Officer (SAO) provisions? We thought we would provide you with a brief overview of what these provisions (derived from the Schedule 46 of the Finance Act 2009) mean so that you know what you should be doing to remain compliant if you are impacted.

What are the SAO provisions, briefly?

These provisions have been enacted in the Finance Act 2009 and have the authority of law. Being in breach of the law would result in the imposition of penalties. The provisions require large companies to establish and maintain their tax accounting arrangements. To achieve this purpose, companies are required to appoint a Senior Accounting Officer. The body appointed to check compliance with the SAO provisions is HM Revenue & Customs (HMRC). The provision of a SAO is a measure aimed at reducing the tax gap through improvements in organisations’ tax governance.

Which types of companies are affected by these provisions?

They apply only to a qualifying company, that:

1. Is incorporated in the UK in accordance with the Companies Act 2006, in a financial year;
2. Has a turnover of more than £200 million and/or;
3. Has a balance sheet total of more than £2 billion for the preceding year.

As such, a partnership or public body would not be affected. A company incorporated in the UK under the Building Societies Act 1986, for instance, would not meet the condition of being qualified.

When do the provisions apply?

The obligations of the qualifying company are for financial years (the financial years of the company) that begin on or after 21 July 2009. So, the responsible officers of a company must determine whether it is a qualifying company for every specific financial year. It is possible for a company to be a qualifying company in one financial year, but not a qualifying company the year after, or vice versa. Once the company meets the definition of a ‘qualifying’ company in a financial year, the name of the SAO must be notified to HMRC.

Who is the SAO?

The Senior Accounting Officer is the director or officer who, in the company’s reasonable opinion has overall responsibility for the company’s financial accounting arrangements. A company can only have one SAO at any time. It is in the company’s interests to identify who their SAO is early in their financial year, so that the person can undertake the responsibilities set out in the provisions.

N.B The law makes this a key role and responsibility within the company. It cannot be outsourced.

What are the administrative requirements imposed on a qualifying recruitment agency?

For each financial year, the qualifying company must notify the following, on or before the same date that it is required to file its accounts for that same financial year:

1. The financial year to which the notification relates.
2. The name of the SAO for the financial year.
3. The period within the financial year in which that person was the SAO.
4. Sufficient information to allow HMRC to contact the person.
5. The company for which the person was acting as SAO.

Please note – the notification has to be in written form. Notification given in any recognised paper or electronic form should be sufficient.

What is expected of the SAO?

The SAO has 2 main duties:

1) Establish and maintain tax accounting arrangements.

To mention a few, he is expected to ensure that risks to tax compliance are properly managed; establish monitoring processes; institute improvements where loopholes are found.

2) Provide a certificate to HMRC after the end of the financial year of the qualifying company.

In the certificate, the SAO must state that either the company had appropriate tax accounting arrangements throughout the financial year or, if it did not, give detail in respect to which of the arrangements were not appropriate.

What is the timeline to submit the certificate to the HMRC?

No later than the end of the period allowed for filing the company’s accounts for the financial year with Companies House.

What penalties are imposed?

Should the SAO fail to do either of his 2 duties, he is personally liable to a penalty of £5,000 for either offence and a maximum of £10,000 for both offences. The company is also liable for a penalty of £5,000 if it fails to inform the HMRC of the name of its SAO within the required timeline.

What should you be doing now?

In order to comply with the provisions, you will need to take reasonable steps to ensure that your company has appropriate tax accounting arrangements.

The following will help you carry out a review of your company’s tax accounting arrangements:

1. Identifying, understanding and documenting key tax compliance risks within the business;
2. Putting in place a framework that will mitigate such risks and monitor activities on an ongoing basis to ensure that controls are working effectively;
3. Ensuring that there is a process in place to deal with tax sensitive transactions.