How to Stay Safe from HMRC
22 May 13 | By: Jas Jhooty
This week’s blog explains the reasons for keeping your expenses policy up-to-date.
How old is your expenses policy?
When was the last time you updated your expenses policy? HMRC Employer Compliance Officers (ECO) always ask for a copy of your expenses policy at a PAYE & NIC Employer Compliance Review. One of the main indicators into how much time they will spend scrutinising your expenses sheets is the age of your expenses policy. An out of date policy with references to, for example: -
Also a badly worded expenses policy may not be clear enough as to what is allowable and what isn’t. Some expenses policies do not even make it explicitly clear that any non-business private use expenses claimed must be reimbursed.
Expenses Claim Forms
The ECO will also examine the format of your expenses claim forms. These tend to be designed to capture as much information as possible for various departments i.e.: -
leaving extremely limited space for the employee to enter enough details of the purpose of the expense. This in turn makes it very difficult for the authorising line manager to check the accuracy of the expenses claimed.
Redesigning your expenses policy
We recommend updating your expenses policy after a PAYE Healthcheck review. This is so that any mistakes you are currently making can be uncovered and addressed.
The needs of your business are paramount when the expenses policy is being redesigned. For example you may have a requirement to cut your Travel & Subsistence expenditure. In this case a rigid rule-laden policy written in an authoritative tone should encourage policy adherence.
Spreading the word
After you have gone to all of the trouble to re-write your expenses policy, the next step is to communicate this to your staff. Employees can be made aware by posting it on the intranet or by emailing them a copy. References to it should be made in the Staff Handbook.
We highly recommend training senior management into the importance of checking the expenses claim for accuracy and not being frightened of knocking back suspicious or incorrect claims. The senior management can then inform their middle managers who can subsequently their staff members that the new expenses regime is more rigid & thorough.
Policing the system
Despite everyone’s best efforts mistakes can still arise. It is the ECO’s job to uncover these mistakes and extrapolate any tax consequences across all employees going back a number of years. To mitigate against this it is vital that whoever is responsible for paying the expenses also performs spot-checks. It is recommended that you should perform a 5% sample check and to keep a record of which claim forms where policed.
How emTax can help
emTax consultants are all ex-HMRC Inspectors and can advise you how to design a new compliant up-to-date expenses policy. Our philosophy is to offer the same advice to employers on employment tax matters as the Big 4 accountancy firms but at a fraction of their prices.
If you want to find out more about this or any of our other services please contact us.