SAOG18400 - In what circumstances is a penalty chargeable: failure to comply with the main duty

Where a Senior Accounting Officer (SAO) fails to comply with the main duty, see SAOG14000, in a financial year, a penalty of £5,000 is chargeable on the SAO for the financial year. If the company has not notified HMRC of the name of its SAO, see SAOG18550.

The main duty of the SAO is to take reasonable steps to ensure that the company establishes and maintains appropriate tax accounting arrangements by

  • monitoring the accounting arrangements of the company and
  • identifying any respects in which the tax accounting arrangements are not appropriate tax accounting arrangements.

This will extend to any activities carried out by other parties as part of the company’s tax accounting arrangements that will impact on the calculation of the companies relevant liabilities, see SAOG14335, SAOG14465 and SAOG14470.

Failure to comply with the main duty occurs where the SAO fails to take reasonable steps.

Where the SAO identifies any tax accounting arrangement which is not an appropriate tax accounting arrangement they should report this on the SAO certificate. However the SAO is unlikely to fail in the main duty if they have taken reasonable steps to ensure that they are able to

  • identify inappropriate arrangements without delay and
  • establish appropriate arrangements in their place again without delay.

Where HMRC discovers a deficiency in the company’s tax accounting arrangements that has not come to light previously, there may be a main duty failure on behalf of the SAO. If it becomes clear that the SAO did not take reasonable steps to ensure the company established and maintained appropriate tax accounting arrangements thereafter, the SAO will have failed in the main duty and a penalty will be chargeable. Not withstanding the penalty issue, the Customer Compliance Manager (CCM) or Mid-sized Business Caseworker should work with the SAO to determine how the failure arose and how the SAO will address the problem so that it does not reoccur.

An SAO is not liable to more than one penalty in respect of a failure to comply with the main duty for the same company and the same financial year. (However, an SAO may be liable to a penalty in relation to a certificate as well as a penalty for a failure to comply with the main duty.)

Where there is more than one SAO for a financial year

Only a person who is SAO during the financial year can be liable to a penalty for failure to meet the main duty. For guidance on which person will be liable for a penalty for failure to meet the main duty, see SAOG18700.

Where a person is the SAO for a number of group companies

Where a person is the SAO for a number of group companies, they are responsible for complying with the main duty for a financial year of each of those companies.

However, see the following situations.

Situation 1

The financial years of this company and the other group companies for which the particular person is the SAO all end on the same day,

and

we have already charged a main duty penalty on that person in respect of one of the other group companies.

Can we charge a penalty for failure to comply with the main duty?

We cannot charge a main duty penalty on that person in respect of this company

Situation 2

The financial years of this company and the other group companies for which the particular person is the SAO do not end on the same day,

and

we have already charged a main duty penalty on that person in respect of one of the group companies whose financial year ends within this company’s financial year.

Can we charge a penalty for failure to comply with the main duty?

We cannot charge a main duty penalty on that person in respect of this company.

Situation 3

No main duty penalty has been charged in the situations above.

Can we charge a penalty for failure to comply with the main duty?

We can charge a main duty penalty on the person in respect of this company.

Example

The same person holds the SAO role for all the companies within a group. The companies’ financial year ends are

  • Company A - 30 June
  • Company B - 30 September
  • Company C - 31 December

We charge a main duty failure penalty on the SAO in respect of company A’s financial year ended 30 June 2012. This financial year end date is within company B’s financial year ended 30 September 2012 and company C’s financial year ended 31 December 2012. We could not charge the SAO a similar penalty in relation to these two financial years even if the SAO had failed to comply with the main duty in relation to those two companies in those two financial years.

However, if we had charged a main duty penalty on the SAO in respect of company B’s financial year ended 30 September 2012 first, the situation would be different. In that case, when we came to consider the SAO’s main duty failure for company A, we could also charge the SAO with a main duty penalty in respect of company A for its financial year ended 30 June 2012. This is because, although we have already charged a main duty penalty for company B, its financial year does not end within the relevant financial year of company A. However, we could not charge a penalty on the SAO in respect of company A for its following year, the year to 30 June 2013, if there was a similar failure.

To ensure that CCMs or the Mid-sized Business Customer Engagement Team (CET) keep track of the assessment of penalties for failure of main duty in group situations, especially where there are differing financial year ends, and that they apply correct treatment of further failures that may arise, CCMs and the CET should maintain a record of ‘group’ failure of main duty situations.

If CCMs, the CET or a Caseworker need advice in such cases they should contact their nominated business contact.

Reasonable excuse

The SAO will not be liable to a penalty for failing to comply with the main duty if they have a reasonable excuse, see SAOG20000, for not doing so.

Other penalties for a financial year

A penalty for a failure to provide a certificate or providing a certificate containing a careless or deliberate inaccuracy may be chargeable on an SAO for a company for a financial year in addition to a penalty for failing the main duty. The CCM, CET or a Caseworker may become aware of these failures at different times and raise penalty assessments at different times.

FA09/SCH46/PARA4
FA09/SCH46/PARA8
FA09/SCH46/PARA9(3)