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Excess mileage

Excess mileage claimed number of years not on p11d

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Any assistance appreciated. Whilst completing p11ds this year a client (Ltd company) has now informed me that he has been paying home to work mileage for a number of years(3-4years). Obviously this should have gone through the payroll and p11ds submitted. What is the best way to rectify this now, with least damage in respect of penalties etc. The overpaid mileage is a few thousand pounds. 

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08th Jun 2019 10:31

What's he been doing that for ?

Eh dear. Clients, eh ?

PAYE Settlement - if you volunteer the underpayment, should be light on penalties.

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to lionofludesch
08th Jun 2019 12:23

Exactly clients!!! Grrrrr...
Then when we put it right for them, they'll complain about the additional tax and fees for our time. Lose, lose situation.
Anyway thanks for your input, I'll have a look at paye settlements.

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By Matrix
08th Jun 2019 10:38

Do you mean the company is paying for the mileage but you do not consider it a business expense? Do you also prepare the accounts, if so, how has it been treated?

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to Matrix
08th Jun 2019 10:51

Sure - it's a business expense !

It should've been taxed as wages. It's not a P11D thing.

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By Matrix
to lionofludesch
08th Jun 2019 11:08

I don’t have any of the facts to assess whether it is a business expense, the first two years may have been if it is a one man band with place of business at home, so I assumed that the OP had already done the analysis and had concluded that none of it was a business expense. These facts were not provided. Nor why this was not picked up when the accounts were prepared.

I agree it should have been payrolled (or booked to DLA) but how does a PAYE settlement agreement help then or is a PAYE settlement something different?

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to Matrix
08th Jun 2019 11:34

Matrix wrote:

I agree it should have been payrolled (or booked to DLA) but how does a PAYE settlement agreement help then or is a PAYE settlement something different?

It's wages. The employees should have paid tax on it. The PAYE settlement arrangements were brought in specifically to deal with this situation - employer makes an error but doesn't want the embarrassment of having his employees get a tax bill.

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to lionofludesch
08th Jun 2019 15:53

lionofludesch wrote:

The PAYE settlement arrangements were brought in specifically to deal with this situation - employer makes an error but doesn't want the embarrassment of having his employees get a tax bill.

Not sure PSAs were brought in to allow failure to apply PAYE to cash earnings to be rectified. Way back it was more for benefits to be paid free of tax especially when it was difficult to attribute cost to specific employees.

Also, I thought that you had to apply for a PSA in advance (or close):

"The deadline for applying for a PAYE Settlement Agreement (PSA) is 5 July in the tax year it applies to."

https://www.gov.uk/paye-settlement-agreements/deadlines-and-payment

https://www.gov.uk/paye-settlement-agreements/how-to-get-a-psa

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to Accountant A
08th Jun 2019 16:06

I agree. Although it should still be possible (and perhaps this is what was envisaged) to agree with HMRC that the employer will pick up the tab for the tax and NI on the grossed-up earnings.

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to Wilson Philips
08th Jun 2019 16:14

Wilson Philips wrote:

I agree. Although it should still be possible (and perhaps this is what was envisaged) to agree with HMRC that the employer will pick up the tab for the tax and NI on the grossed-up earnings.

Yep - I've done this. It's possible.

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to lionofludesch
08th Jun 2019 12:18

The company paid excess mileage so effectively earnings for paye. It has been included as travel in the accounts as the client has said it was legitimate business mileage.

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to Grizzler
08th Jun 2019 13:35

What you've not made clear is - to whom ?

Is this a director who's paid mileage to himself ?

Or has he a raft of employees to whom he's paid home to work mileage ?

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to lionofludesch
08th Jun 2019 15:39

He has paid the mileage to one employee who isn't a director.

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to Grizzler
08th Jun 2019 18:03

Grizzler wrote:

He has paid the mileage to one employee who isn't a director.

Imho, that gives you a better chance of a PSA than if he'd just paid home to work mileage to himself. To some extent, it'll depend on the officer dealing with the case but, at the end of the day, emphasise that the employer admits he's c0cked up and is prepared to put it right at his own expense.

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By raycad
to lionofludesch
12th Jun 2019 11:11

You can't include monetary payments in a PSA. PSAs are purely for benefits IN KIND which are minor, irregular or difficult to apportion between a group of employees. Plus, as one poster has already stated, a PSA cannot be applied for re years prior to the most recent one (and even for the latter, must be before 6 July).

This is something that should have gone through payroll and been subject to PAYE and E'ers and E'ees NIs. In this situation (and as its not a director) THERE IS NO GROSSING UP.

A Voluntary disclosure should be made to the HMRC Employers Unit at Longbenton. An unprompted voluntary disclosure may well escape any penalty, provided it was not a 'deliberate' act, but merely a misunderstanding of the commuting costs rule.

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to raycad
14th Jun 2019 17:09

raycad wrote:

You can't include monetary payments in a PSA. PSAs are purely for benefits IN KIND which are minor, irregular or difficult to apportion between a group of employees. Plus, as one poster has already stated, a PSA cannot be applied for re years prior to the most recent one (and even for the latter, must be before 6 July).

This is something that should have gone through payroll and been subject to PAYE and E'ers and E'ees NIs. In this situation (and as its not a director) THERE IS NO GROSSING UP.

A Voluntary disclosure should be made to the HMRC Employers Unit at Longbenton. An unprompted voluntary disclosure may well escape any penalty, provided it was not a 'deliberate' act, but merely a misunderstanding of the commuting costs rule.

Technically, you may well be correct. But HMRC often take a pragmatic view.

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to lionofludesch
12th Jun 2019 11:48

It is a P11D thing - P11D accounts for the tax, class 1 NI through the payroll. Putting it all through the payroll is simpler but the P11D does have a separate box for excess mileage payments above the 45p/25p rates.
EDIT: not sure I read the OP properly re. home to work, so on balance I agree with Lion it should be wages

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to Matrix
08th Jun 2019 12:16

.

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By ChrisKH
12th Jun 2019 11:24

Whilst you can volunteer to put this on a PSA settlement agreement, there's no obligation for HMRC to approve this, not least as it's not the sort of cost that would ordinarily appear. That said, I've seen non-PSA costs on an agreement before.

For the tax years not disclosed to date, make a written disclosure to HMRC (before they find out) and take the penalties on the chin. At that point you can ask for the item to be on a PSA agreement going forward. You won't get a PSA agreement for this for back years; maybe 18/19.

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By raycad
to ChrisKH
12th Jun 2019 11:53

As I've already posted, cash (= monetary) payments are simply NOT permitted within a PSA. HMRC has just withdrawn what was effectively a concessional treatment to include non-exec directors' reimbursed travel costs in a PSA for the same reason.

Anyway, why would you want to? A PSA will result in a gross-up. Putting it thru the payroll wouldn't.

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By ChrisKH
to raycad
12th Jun 2019 14:51

Trust me, if you have enough monetary payments stretched across many employees, HMRC may allow these to be included on an enduring PSA on request. Why would they not, when they can collect all the tax and NI in one hit, without much work on their part? I think you are right for a one off occurrence like this though. In practice it does happen, albeit exceptionally.

I agree, it seems odd to want to pay a grossed up PSA liability when you can put this through the payroll, or include benefits on a P11d and let the employees pay, but there are companies out there that have objectives other than pay & tax/NI reduction.

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By raycad
to ChrisKH
12th Jun 2019 15:37

HMRC don't knowingly "allow" monetary payments to be included in a PSA. (They might "look the other way" if discovered post-event and the amount is not significant and, yes, I have seen that myself.) In truth, unless cash payments are discovered via an employer compliance visit, HMRC won't be any the wiser as the PSA Unit is merely a processing team.

If someone asks me "What is the legal limit on a motorway?", I tell them 70mph. If they ask "What can I get away with without a speeding ticket?" I might say 78mph. But 70 is the only bombproof answer.

As to "Why would they not?", well there at least two good reasons. The first is our old friend, cashflow: getting the money in the kitty up to 15 months earlier. The second is that if it goes thru payroll it attracts E'ees NICs, whereas E'ees NI is not charged in a PSA. That's the real reason why monetary payments are excluded.

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14th Jun 2019 10:58

YOu have not said how much or how long. It could be easier to get the back SA100's amended and the company pay each employee extra net salary that month to cover the cost

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