Senior Accounting Officer must provide a certificate to HMRC: what must a SAO certify
A Senior Accounting Officer (SAO) must certify one of two things:
- That the company had appropriate tax accounting arrangements throughout the financial year of the company; or
- That the company did not have appropriate tax accounting arrangements throughout the financial year of the company.
We will not regard the SAO as having provided a valid certificate if the certificate does not follow one of the two options set out below.
First option - provide an ‘unqualified certificate’
The SAO should provide an unqualified certificate if the company had appropriate tax accounting arrangements in place throughout the financial year. Appropriate tax accounting arrangements are accounting arrangements that enable the company to calculate all its relevant liabilities accurately in all material respects. An unqualified certificate must not contain statements that may imply qualification. See SAOG15300 for a specimen unqualified certificate.
Second option - provide a ‘qualified certificate’
The SAO should provide a qualified certificate if the company did not have appropriate tax accounting arrangements in place throughout the financial year. Appropriate tax accounting arrangements are accounting arrangements that enable the company to calculate all its relevant liabilities accurately in all material respects. See SAOG15400 for a specimen qualified certificate.
It is for an SAO to consider whether any particular shortcoming or area for improvement identified in the tax accounting arrangements means that those arrangements were not appropriate and therefore that a qualified certificate is required. ‘Hybrid’ certificates that state that the tax accounting arrangements were appropriate but then list shortcomings or areas for improvement are not acceptable.
As long as the SAO makes a well-reasoned and balanced judgement about whether or not to include a particular issue on the certificate, HMRC is very unlikely to consider an omission to be careless or deliberate, see SAOG18600. The SAO may want to discuss any areas of doubt with the company’s Customer Compliance Manager (CCM) or the Mid-sized Business Customer Engagement Team (CET) as part of their open dialogue with HMRC. However such discussion will not alter or remove the SAO’s obligations to make the judgements or decisions necessary to carry out their main duty and to provide a clear, unambiguous certificate confirming whether or not the company had appropriate tax accounting arrangements throughout the financial year.
The SAO certificate is not the vehicle for disclosing individual accounting errors. The company should use normal channels for disclosing any such errors, such as their CCM or the CET. It is not an obligation of the SAO to make such disclosures.
For the purposes of the SAO certificate, the SAO needs to consider why errors have occurred and whether they are indicative of shortcomings in the tax accounting arrangements (meaning that the accounting arrangements did not enable the company’s relevant liabilities to be calculated accurately in all material respects). If they are not indicative of shortcomings, then those tax accounting arrangements were not inappropriate and should not be included on the certificate.
See SAOG14350 to SAOG14353 for examples of shortcomings and SAOG15450 for the level of detail about shortcomings that the SAO should include on a certificate.
Certificates in particular circumstances
Person becomes SAO during a financial year or within the period for filing the certificate
For that year we do expect that person to investigate the tax accounting arrangements that were in place before they became the SAO and so be in a position to provide a certificate covering the whole financial year. Whether or not they actually have to provide the certificate will be determined in accordance with SAOG15800.
The new SAO will need to ensure that from the date they become SAO they address the main duty requirements, see SAOG14100, and to do this they will have to research and understand the accounting arrangements that they have inherited anyway.
We accept, however, that the knowledge of the new SAO will not be as comprehensive as that of the person who was the SAO at that time. Despite their best efforts, there might be some matters for which the new SAO cannot establish whether there were appropriate tax accounting arrangements or not. In that circumstance, and where the CCM or the CET is content that the SAO had indeed exercised their best efforts to fulfil their main duty and has submitted a SAO certificate on this basis, we would regard the SAO as having taken reasonable care to provide an accurate certificate.
Person becomes SAO after company goes into liquidation or administration
Where a person is determined to be the SAO after a company goes into liquidation or administration we do not expect that person to investigate the tax accounting arrangements in place prior to the liquidation or administration. However, if that person comes into possession of information relevant to the period of the financial year prior to the liquidation they should ensure that they are in a position to make the appropriate comments on the SAO certificate. Whether or not they actually have to provide the certificate will be determined in accordance with SAOG15800.
We do of course expect a person determined to be the SAO after a company has gone in to liquidation or administration to be in a position to report on their period in this role in the normal way.