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This week's opinion: 13 February 2020

11 February 2020 / Andrew Hubbard
Issue: 4731 / Categories: Comment & Analysis
Was this SAO penalty really justified?

I read the Castlelaw case ( with growing concern. This was an appeal against a penalty imposed on the company and an individual officer, for failures under the senior accounting officer (SAO) regime. The failure was about as inconsequential as you can imagine: a dormant company in a group of nearly 100 companies had been inadvertently omitted from a group structure chart that had been submitted as part of the annual SAO return.

 Anybody who has been involved with the taxation affairs of a large group knows just how difficult it can be to keep group structure diagrams up to date and to keep track of dormants. Although the penalties were technically due it does seem to me wholly counterproductive for HMRC to impose a penalty in this sort of situation.

The SAO regime is part of what is intended to be a framework of openness and collaboration between HMRC and large corporate groups. HMRC’s slides, which it used in its presentation to the company, stressed that the focus was on key risks and that there was no requirement to be ‘penny perfect’, yet the group’s senior accounting officer, who from everything one can see in the case was doing an excellent job in managing the group’s tax risk and who appears to have a transparent and honest relationship with HMRC, has now been burdened with a personal penalty of £5,000. I can imagine that the reaction of many readers would have been, like me: ‘There but for the grace of God go I.’ 

There is something very wrong with a system that allows this to happen and I hope that action will be taken so that the same situation won’t occur again.

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Issue: 4731 / Categories: Comment & Analysis
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