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HMRC has fined over 100 senior finance directors of Britain's largest companies, a 150% rise from 5 years ago. Executives in the financial services and retail sectors received the highest number of fines.

The senior accounting officer (SAO) regime applies to companies or groups with turnover exceeding £200 million or gross assets exceeding £2 billion. The SAO's primary duty is to take "reasonable steps" to ensure that the company establishes and maintains appropriate tax accounting arrangements, i.e. arrangements that enable the company's liabilities to specified taxes, including VAT, to be calculated accurately in all material respects. Failure to do so can result in a fine on the SAO of £5,000 for each financial year.

In the first decision on the regime, the First Tier Tribunal in July 2017 confirmed that an SAO's duties are tailored to the particular circumstances of the company and that the existence of mistakes in tax returns does not automatically lead to the conclusion that the SAO failed to take "reasonable steps" to ensure appropriate tax accounting. In this case, Kreeson Thathiah successfully appealed against the fines issued against him. The judge stressed that the test is whether the SAO has taken reasonable steps to ensure appropriate accounting arrangements and found that Mr Thathiah had, given the limited resources available to him and the processes he had put in place.

Action points

  1. Depending on your company size and circumstances, ensure you have appropriate accounting arrangements in place, including training your staff.
  2. Seek advice from external accountants.
  3. Keep evidence of the processes and controls you have instituted.

Source: Kreeson Thathiah and the Commissioners for the HMRC, [2017] UKFTT 0601, TC06043