HMRC issues fines to 115 finance directors, senior finance executives

HMRC fined 115 finance directors and senior executives of large businesses last year, according to law firm Pinsent Masons.

In 2009, the Senior Accounting Officer (SAO) regime was introduced, enabling HMRC to fine senior executives £5,000 in cases where the individuals failed to account for a company’s income and expenses in line with HMRC requirements. The SAO regime applies to UK companies with turnover exceeding £200m or a balance sheet in excess of £2bn for the preceding year. The initiative requires companies to appoint an individual to act as SAO, a role in which they have the responsibility for the business’ tax accounting affairs.

Financial services and retail were the two sectors with the most fines – with 16 individuals in each sector issued with the penalty.

The total number of penalties issued has increased 150% over the past five years, up from 46 in 2012-13. Pinsent Masons said the increase demonstrated that HMRC was determined to “hold individual senior executives to account for flaws in a business’ affairs.

Jason Collins, partner at Pinsent Masons, said: “HMRC is going after the most senior people it can, without exceptions.

“Putting finance directors in the firing line is a definite escalation of HMRC’s tactics.

“Given the scale and complexity of the money flows in large businesses, simple errors in the finance department can result in miss-reporting and subsequent fines.

“Finance directors need to understand all the requirements set out by HMRC. The policies, procedures and systems in place to ensure tax compliance need to be carefully monitored to avoid the potential for mistakes.”

Earlier this year, the Upper Tribunal ruled in favour of HMRC in a tax avoidance case, expected to result in £325m for the revenue authority.

In September, HMRC released data showing that diverted profits tax revenue had totalled £281m in 2016-17, up from £31m in the previous year.