SAO and tax strategy obligations - new HMRC campaign

HMRC has initiated a new campaign targeting companies where it thinks little may have been done on meeting Senior Accounting Officer (SAO) obligations or simply where SAO deadlines may have been missed.

Using the data it holds, HMRC’s Wealthy Mid-sized Business Compliance team and its Large Business directorate have been sending out automatically generated reminder letters to businesses. Unusually, by the normal standards of HMRC reminders, the letters do not focus heavily on the penalties that HMRC can levy for non-compliance but it should be immediately obvious that failing to meet these requirements triggers significant risks for both businesses and their relevant officers.

Many businesses will be facing an SAO deadline at the end of September, for example, where they have a December year-end (or are plcs with a March year-end). We understand that HMRC’s campaign has already caused some companies to realise that they have not met their obligations.

Are you in or out?

For both the SAO and tax strategy obligations, the entry qualification rules bring in:

1. All UK incorporated companies with UK turnover of more than £200m and/or balance sheet total of more than £2bn in the last financial year.
2. All UK incorporated companies that are members of a group (including groups with a non-UK topco) with aggregate UK turnover and/or balance sheet total that meet the same qualifying test above.

Limited liability partnerships are specifically excluded, as are UK branches of offshore incorporated companies.

SAO obligations

The company must:

1. Notify HMRC who is the SAO for each financial year that the company is qualifying.
2. Provide a signed certificate to HMRC either stating that:

• The company had appropriate tax accounting arrangements throughout the financial year (‘unqualified certificate’), or
• The company did not have appropriate accounting arrangements throughout the financial year and give details about the respects in which the arrangements were not appropriate (‘qualified certificate’).

Read more on SAO obligations.

Tax Strategy obligations

The same organisations are also required to publish a tax strategy online by the end of their financial year-end. The strategy must set out:

1. The approach of the group to risk management and governance arrangements in relation to UK taxation
2. The attitude of the group towards tax planning (so far as affecting UK taxation)
3. The level of risk in relation to UK taxation that the group is prepared to accept
4. The approach of the group towards its dealings with HMRC.

It is also advisable for a company’s tax strategy to include:

• Introductory comments such as the wider business context, alignment to wider Corporate Social Responsibility initiatives, Board involvement in tax, etc.
• Other elements, such as approach to tax compliance and reporting, adherence to other tax transparency initiatives, comments in relation to specific tax matters like transfer pricing.

Read more on preparing and publishing your tax strategy and HMRC’s updated guidance.

For help and advice on any tax risk and strategy issue please get in touch with James Egert or Ed Dwan.