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Inland Revenue compliance visit

Inland Revenue compliance visit

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Following an IR compliance visit , they correctly pointed out we have not paid NIC on home phone costs reimbursed to our sales manager. However on checking form PIId and Return of Class 1A, I find that on the former, line 1.23 (telephone ) does not have a "flag" beside it directing the total to the latter. If so does the Inland Rev have to give in.

They also claim "gifts to employees" include flowers to employees who have suffered bereavement or who have given birth. Any views - amounts small, but principle?

Stanley Nowak

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By lfidler
27th Feb 2003 13:14

Using terms the Revenue will understand
Whilst accountancy may rely on principles, taxation (and the incidence of NICs) is based on legislation, as expanded by case law and Inland Revenue concessions and practice. The Revenue administers the tax law that Parliament makes, so blaming the IR auditor who is only following instructions and has no control over their fairness and reasonableness (or not) won't make any difference. Instead, replying in terms that he/she can relate to and is empowered to accept may settle the matter quickly.

Meeting employees' personal liabilities (such as home phone bills addressed to them) brings Class 1 NICs through the payroll, that's why it has no Class 1A flag on the P11D, it should have been dealt with in the month the bill was reimbursed, not on the P11D after the tax year end. See IR leaflet CWG 2 Employer's Further Guide to PAYE and NICs, pages 77 and 82. (Go to www.inlandrevenue.gov.uk for on-line access to such guidance) or more specifically: http://www.inlandrevenue.gov.uk/pdfs/emp2002/cwg2_merged.pdf

But watch that you only settle NICs on the rental and private calls, and NOT on the business calls that he made.

As far as the flowers go (and on a more positive note), you need to look in the Revenue's published manuals on the topic: the Schedule E manual, at SE22900-22920 is often overlooked by Revenue staff and deals with 'Trivial Benefits'. In summary, staff are told to leave these alone. http://www.inlandrevenue.gov.uk/manuals/senew/se22900.htm. (or go to the IR homepage and look under 'publications' and then select 'manuals')

Alternatively, ask your tax adviser (or get another one?)

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By Abacjm
22nd Feb 2003 01:45

Pedantics
As usual, the small business compliance is being raided to pay for the excesses of Govt. If he insists on taxing flowers sent as a gesture of support to bereaved staff members families, just ask him when the revenue are going to tax Tony Blair & Co on the benefit of someone always opening and closing the car door for him!!
The unless he (the Compliance Officer) is prepared to pay for the privilege of sitting down in your office at risk of it being a BIK, get him to conduct his interview standing in the corridor on a fully rentable square foot! If he complains, show him your Office annual Business Rates demand, which is based on its theoretical annual rental value!
Acoounting is always based on Principles, so stick by yours!

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