Guidance for Senior Accounting Officers (SAOs) has been updated by HMRC following the First Tier Tribunal's (FTT's) dismisal of an appeal in the Castlelaw case. The guidance has been relaxed in relation to reporting obligations for dormant companies and penalties for late certificate filing.

In Castlelaw (No628) Ltd & Irene Douglas v HMRC [2020] TC7540, the FTT held that penalties imposed on Castlelaw and Irene Douglas as SAO, for not including the dormant company on the group notification had been correctly applied. There was no reasonable excuse defence available. The FTT were unable to rule on the fairness of the penalties and whether or not the penalties should have been subject to HMRC's discretion but were clear in their comments that HMRC should have applied their discretion in light of the facts.

In light of those comments, HMRC have now amended the SAO guidance and in particular, added three new pages:

  • SAOG18850: Guidance on when HMRC should exercise discretion as to when to apply penalties, with specific reference to the Castlelaw case. The new guidance states that where the risk assessment is low and details for dormant companies have been omitted, penalties should not normally be assessed.
  • SAOG18875: It gives examples of when penalty discretion can be applied, particularly in relation to dormant companies.
  • SAOG15350: Provides a template for the wording of an Unqualified Statement and acknowledgement that it can be combined with the company notification of all SAOs.

Useful guides on this topic

Castlelaw (No628) Ltd & Irene Douglas v HMRC [2020] TC7540
In Castlelaw (No 628) Limited and Irene Douglas v HMRC [2020] TC7540, the First Tier Tribunal upheld penalties under the Senior Accounting Officer rules for failures to make notifications about a dormant company. An innocent mistake was not a reasonable excuse.

Penalties: Senior Accounting Officers
The Senior Accounting Officer (SAO) of a large company is required under Schedule 46 FA 2009 to ensure the existence of, and report on, the appropriateness of their tax accounting arrangements. Penalties are charged in the event of failures.

Grounds for Appeal: Reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal against a tax compliance failure?

External Links

Senior Accounting Officer Guidance

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