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Unreceipted expense claim

Client has provided their P11d info and accounts to June 11 in one go (yes I know P11ds are late).

The expense claim (he is Ltd Co contractor) details each day mileage x to Y, other sundry items eg train etc but every day he is on site he has claimed £2.20 coffee and £6.00 subsistence. The daily claim merely says "Subsistence (un-receipted)" - it adds up to some £1500.

I am quite sure he oes buy a costa/starbuck every day and lunch, I have no issue with that but he same every day - not even any allowance for more/less on hungry/non-hungry days!!

Now I know he will say, "my last accountant let me do it and never mentioned I was doing anything wrong", but I am of a mind to go back and tell him that he can't do the round sum claim without proof. Or at least he can but he will get taxed on it.

Before I shove my size 12s in my mouth do any of you have any ideas as to a practical resolution.

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11th Jul 2011 12:00

Difficult

...because as you say, 95% it is genuine.  There is still that ethos out there of 'I'm entitled to expenses of x and that's it'.

You say they have given P11d info - so presumably the employer has a dispensation covering the daily amount paid?  If so there is no problem:

Scale rates seem to be as follows (from HMRC website - revenue and custome brief 24/09):

Benchmark system/rules

Under the benchmark system, HMRC has set advisory scale rates for particular day subsistence expenses that it will accept for all employers. As long as the employee has incurred subsistence expenses while travelling on an allowable business journey, employers will be able to make tax and NICs free subsistence payments up to the advisory rates without agreeing them with HMRC. Employers wishing to use the benchmark scale rates for subsistence payments will simply need to notify HMRC of their intention by ticking the appropriate statement/box on form P11DX before starting to use the system. The rates that can be used will be:

Breakfast rate (irregular early starters only) - A rate of up to £5.00 may be paid where a worker leaves home earlier than usual and before 6.00 am and incurs a cost on breakfast taken away from his home. If the employee regularly leaves home before 6.00 am because, for example, he works an early shift he would not be entitled to use the breakfast benchmark scale rate.

One meal rate (Five hour rate) - A rate of up to £5.00 may be paid where the worker has been away from his home/normal place of work for a period of at least five hours and has incurred a cost on a meal.

Two meal rate (Ten hour rate) - A rate of up to £10.00 may be paid where the worker has been away from his home/normal place of work for a period of at least ten hours and has incurred a cost on a meal or meals.

Late evening meal rate (irregular late finishers only) - A rate of up to £15.00 may be paid where the employee has to work later than usual, finishes work after 8.00 pm having worked his normal day and has to buy a meal which he would usually have at home.

If the employee is paid an allowance under the five or ten hour rule, the late meal allowance could still be paid if he finishes work after 8.00 pm and buys a meal that he would usually have at home. However, if the employee regularly finishes work late because, for example, he normally works the afternoon or evening shift, he would not be entitled to use the late evening meal rate.

 

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11th Jul 2011 12:37

no dispensation in place...

There is one for 11/12 year but I was appointed too l ate for the 10/11 year.

Would the fact there was not one in place matter?

Is it possible to adopt the rate without notifying HMRC?

I am just doing P11d now and am unsure where to put the daily claims, round sum allowance perhaps?

Thanks for the answer and any more thoughts most welcome!

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11th Jul 2011 13:39

.

The quick answer appears to be yes, it matters.  The guidance also has some other notes for now onwards that you have the dispensation:

Systems you must have in place

You must have an independent system in place for checking and authorising expenses claims. At a minimum, this means having someone other than the employee claiming the expenses check that the:

amount claimed isn't excessiveclaim doesn't include disallowable items

If it is not possible for you to operate an independent system for checking and authorising expenses claims - for example, because you are the sole director of your company and you have no other employees - you will only be able to obtain a dispensation if you:

ensure all expenses claims are supported by receipts for the expendituredemonstrate that the claim relates to expenditure that can be covered by a dispensation - your receipts may be sufficient for this purpose, but if not you must retain additional information

 

*********************

You will note the stuff about an independent person checking in certain circumstances - may need receipts anyway!

Where a dispensation is NOT in place there is the Class 1A NI to think about too.

If there is not dispensation then they are on very dodgy ground - maybe the previous accountant shut their eyes and hoped it would go away!  There is absolutely no problem with the amounts they have used, but they appear to have adopted theses unilaterally without going through the proper channels.

I think you have to advise him that yes, from now on this is fine, provided everything is checked independetly, but that unfortunately for the tax year you are looking at, he's going to have to swallow the pain - particaulrly if the P11ds are already late.  Not worth the risk of ignoring it IMHO.

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11th Jul 2011 13:49

Thanks

Expense claims are checked, his wife is also a director and runs the IT arm of the business building small websites for local businesses. So OK on that front.

Not really sure about the best route, almost easier to post to directors loan to avoid the problems and vote a small divi instead.

 

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12th Jul 2011 15:36

MAKING US ALL LOOK IDIOTS ???

So, your client is paying you considerable annual fees - and in return you begin to wonder if you should shop him to HMRC for claiming a Costa coffee a day without a receipt ? 

Are you trying to turn everyone in the profession into a complete laughing stock ?

My advice to your client is to get himself a proper accountant. I'm sure there wil be no shortage of candidates on this site.  

 

 

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12th Jul 2011 15:46

That's a little unfair.

There has always been a measure of give-and-take over dispensations and AccountingWeb is a good sounding board for seeing if your own views are too fixed, too flexible or verging on professional misconduct.

We all hope that our own combination of training, experience and common sense gives us a the ability to second guess how HMRC would view any set of transactions, however this (like common sense) is not neccessarily right.

I don't think it's a stupid question and I don't think it's unfair to consider the entire range of consequences for a particular action, if we don't then how can we balance the interests of our clients against the requirements of law, statute and GAAP.

 

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12th Jul 2011 15:53

@ Mike

I have absolutely no intention of doing that and many apologies to anyone if that is how it came across.

I have had the misfortune of seeing (at my previous employer) a client be hit rather severely in such a situation (courier company and all employees claimed similar unreceipted daily allowances and my previous employer had not done the agreement with HMRC as has been mentioned here).

The upshot there was that the 30+ employees were assessed  under a settlement with HMRC, many thousands of pounds.

Based upon that I was asking if anyone had come across this before and hence had suggestions as to how this may be avoided in this situation.

 

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12th Jul 2011 16:44

Meh

Well, similar, but thank goodness not THAT severe!  It was the scratching around type of compliance visit.  After going back through several years they finally came up with a bill of about £600 - mostly arising from exactly this; unreceipted expenses.

Imagine wanting to do the 'right', well statutory, thing......  that wouldn't do at all.

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