Number of U.K. CFOs Hit with Personal Fines Doubles

CFOs or similar finance executives can be personally fined £5,000 ($7,400) for failing to maintain appropriate tax accounting.
Katie Kuehner-HebertDecember 22, 2015

The number of U.K. CFOs and financial directors hit with personal fines for tax accounting failures by the company that they work for more than doubled in the year preceding April 2015, according to figures culled by the U.K.’s HM Revenue and Customs (HMRC) agency figures obtained by U.K. law firm Pinsent Masons.

HMRCThinkstockOn the firm’s blog,, Pinsent Masons’ tax expert Jason Collins said that the doubling in the number of penalties issued by HMRC under the so-called “Senior Accounting Officer” (SAO) regime was “in line with the post-financial crisis tendency by regulators to hold individual senior executives to account for any wrongdoing or non-compliance within an organization.”

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The SAO, who is usually the company’s CFO or similarly senior executive, can be personally fined £5,000 ($7,400) for failing to maintain appropriate tax accounting arrangements or to disclose any issues they identify to the HMRC.

HMRC issued 155 of these fines in 2014 and 2015, up by 112% from the 73 it issued in 2013/14. Roughly 2,000 U.K. businesses, which either have a turnover of more than £200 million or a balance sheet total of more than £2 billion for the preceding financial year, are subject to the regime.

Introduced in 2009, the SAO regime requires large companies to appoint an individual director or officer who becomes personally accountable for that company’s tax accounting arrangements.

The SAO regime was originally enforced in a ‘light touch’ way, with no penalties issued at all by HMRC during the first three years that the rules were in force, Collins said. The total number of annual penalties issued has risen sharply since 2012-2013, when 46 penalties were issued, according to the figures.

“The number of penalties issued is surprisingly high and indicative of a hard-line approach by the Revenue,” said tax expert Jason Collins. “HMRC is clearly not afraid to hold individuals at some of the UK’s largest companies personally liable for not complying with the rules.”

An HMRC spokeswoman told the Financial Director that the penalties “reinforce HMRC’s drive to ensure tax is on the boardroom agenda and promote responsible management of tax. We want to make sure tax compliance is given adequate attention by a senior officer of the company.”

HMRC can issue two types of personal penalty under the regime. The first is levied on finance chiefs for failing to take steps to ensure the accounting arrangements are adequate. The second penalty is for failing to provide an annual certificate either confirming the arrangements are adequate or disclosing details of the deficiencies.

The total number of penalties also includes those issued to businesses for failing to provide the name of their SAO. Accounting arrangements are considered “adequate” if they enable all relevant tax liabilities to be calculated accurately in all material respects.

“SAOs need to ensure that they take the process seriously and fully understand the requirements set out by HMRC,” Collins said. “The policies, procedures and systems in place to ensure tax compliance need to be as robust as possible – the Revenue is quite clearly not afraid to place them under the microscope.”

All processes need to be supported by appropriate planning, risk assessment, training and testing to help curb the potential for mistakes, Collins said. “Given the scale of the money flows in these businesses, one weak link in the reporting system could result in a large under-declaration of liability.”

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