Penalties for breaches of SAO rules

By Tolley in partnership with Philip Rutherford

The following Corporation Tax guidance note by Tolley in partnership with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Penalties for breaches of SAO rules
  • Introduction
  • SAO penalties
  • When will a penalty apply?
  • Assessment
  • Reasonable excuse
  • Penalty governance


There are a number of penalties chargeable for failures in relation to the SAO regulations. In addition SAO failures should be considered in the context of the wider penalty framework as well as in terms of the impact that SAO failures may have on a company’s risk rating with HMRC.

For example, if a company has failed to establish and maintain appropriate tax accounting arrangements it will be difficult to demonstrate that it took reasonable care in relation to an error. See the Reasonable care ― inaccuracies in returns guidance note.

Similarly if a company does not have appropriate tax accounting arrangements in place it is likely to impact on the company’s risk rating. See the Business risk review guidance note.

SAO penalties

The SAO provisions introduce three potential penalty positions, with one chargeable on the company and the other two assessable on the SAO personally. The three potential penalties are assessable as follows:

  • a penalty of £5,000 assessable on the SAO for failure to comply with the main duty of taking reasonable steps to ensure appropriate tax accounting arrangements (FA 2009, Sch 46, para 4; FA 2009, Sch 46, para 1(1))
  • a penalty of £5,000 again assessable on the SAO for failure to provide a timely certificate, or if they provide an incorrect certificate (only if it is considered to be as a result of careless or deliberate behaviour ― see the Calculating the penalty for inaccuracies in returns ― behaviour of the taxpayer guidance note) (FA 2009, Sch 46, para 5)
  • a penalty of £5,000 assessable on the company if it fails to notify HMRC of the name(s) of the person(s) nominated to be the SAO (FA 2009, Sch 46, para 7)

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