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
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To P11D or not, Penalties for not declaring CGT, EIS assurance

In last week’s newsletter we looked forward to the P11D submission deadline on 6 July 2015. If the forms aren’t due you need to tell HMRC to avoid penalties. Taxpayers who avoid telling HMRC about CGT due will also be hit with high penalties, as we explain below. Finally we have news of a change in HMRC’s procedure for EIS investments which anticipates a change in the tax law.

To P11D or not

It’s the P11D and P9D season again. Those forms need to be submitted to HMRC by 6 July 2015 where expenses or benefits were provided to employees in 2014/15, which are not covered by a dispensation, or are not otherwise exempt from tax. If the P11Ds are not submitted on time, penalties will be issued.
But how does HMRC know whether a P11D/P9D is due to be filed? In pre-RTI years when completing the end of year form P35 you had to say whether a P11D was due. Those questions were carried over to the “final” RTI return, but from 6 March 2015 there has been no legal requirement to complete those end of year questions (see our newsletter 22 January 2015). 
If you didn’t complete the “Is a P11D due?” question on the final FPS for 2014/15, HMRC may assume a P11D is needed anyway. To avoid any nastiness with automatic penalties you can tell the HMRC computer that no P11D/ P9D is needed and no Class 1A NIC is due by completing an online declaration (see link below).
The latest Employer Bulletin (no. 53) contains lots of tips for getting the P11Ds right first time, and its worth a read through as it contains some surprising facts. For instance, did you known that a P9D is not needed where an employee is provided with a medical benefit such as health insurance, and that employee earnsless than £8,500 per year?

This is an
extract from our tax tips newsletter dated 23 April 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
for free by registering here>>>