CIS repayments, VAT returns, Employee expenses

Last week’s tax tips addressed three topics from the nitty-gritty of tax compliance work you undertake for your clients. First – good news concerning the CIS tax repayment claims for 2015/16. Next – a warning about checking whether VAT returns tie up to the turnover declared in the accounts. Finally, some clarification on how to operate the new regime for employee expenses in 2016/17.

This is an
extract from our topical tax tips newsletter dated 28 April
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Employee expenses 
Taxation of employee expenses changed on 6 April 2016. If the amounts paid are valid business expenses, they are tax and NI exempt, and don’t have to be reported on a P11D for 2016/17. This also applies to subsistence allowances, but within limits. 
  
The allowances for meals taken while travelling have been reformed (SI 2015/1948), as we reported in our newsletter on 10 December 2015. The employer can choose whether to reimburse meal costs at those rates or use a special method as agreed with HMRC (ITEPA 2003, s 289B). To agree a special method the employer must show that the rates chosen are a valid estimate of the actual costs, by undertaking a sampling exercise. The employer must also make appropriate checks that expenses are only paid where they are due. 
  
By “sampling exercise” HMRC mean obtaining a random selection of expenses actually incurred by employees, to determine what a reasonable subsistence rate would be. Guidance on how to do this is given in the HMRC Employment Income Manual at para EIM30250. Employers who use the benchmark rates set out in SI 2015/1948 don’t have to do a sampling exercise. 
  
Appropriate checks should be done by all employers (ITEPA 2013 s 289A(3)). The employer should periodically check that a random selection of employees has actually incurred some expenditure if they have claimed as business expense. A receipt is not necessarily required, but some contemporaneous record would be needed. Detailed guidance is given in the HMRC Employment Income Manual para EIM30270. 
  
The lesson for micro-companies is – keep the receipts to show that some expense has been incurred, but use the scale rates for meals and travel, for simplicity. Mileage records should always be kept for business journeys, together with a note of the destination and reason for each journey, to prove it was business related. 
 

This is an
extract from our topical tax tips newsletter dated 28 April
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>
 
The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>