HMRC get tough on Travel and Subsistence

Many employees claim travel and mileage expenses:

Travel expenses that qualify for relief

You can get tax relief on the necessary costs of business travel like:

• business mileage allowances for cars, cycles, motorcycles
• public transport fares
• hotel accommodation
• meals
• tolls
• congestion charges
• parking fees
• business phone calls, fax or photocopying costs

But you can’t get tax relief for things that aren’t directly related to the business journey – like your newspaper or private phone calls.

Even if your employer doesn’t pay you the expenses you can still claim tax relief

http://stevejbicknell.com/2011/12/20/how-to-claim-tax-relief-for-employment-expenses/

http://stevejbicknell.com/2011/12/19/tax-refund-for-business-mileage/

Temporary Workplaces and Working from Home

The HMRC rules are set out at http://www.hmrc.gov.uk/manuals/eimanual/eim32000.htm

There is a 24 month rule for a temporary workplace and examples of working from home, these situations are common to Construction Workers, Agency Staff, Consultants, Drivers and Owner Managed Businesses where their home is their office.

Most people have been quick to assume that all their mileage from leaving home is business mileage and they feel entitled to claim for drinks and meals whilst working away from home, many businesses even agreed dispensations for meals of £5 to £10 with HMRC so they didn’t need receipts.

Some organisations tried to use Salary Sacrifice to swap salary for expenses to reduce PAYE/NI.

HMRC v’s REED

Specialist recruiter Reed has spoken of its ‘extreme disappointment’ after losing a £158million battle with the taxman over footing the travel and subsistence bills of temporary job candidates.

Dished out by the staffing company’s agents to 500,000 temporary workers between 1998 and 2006, the daily payments covered lunch – up to £6, and commuting – up to £11.45.

They were meant to be part of a salary sacrifice arrangement – where temps forego some of their salary for such perks, but it has emerged that no real agreement was in place for the six 12-month periods to 2006.

This is because HM Revenue & Customs has successfully argued that the employed temps were engaged under a series of job-by-job contracts and not, as Reed says, under a contract that continued (as an employment contract) following the end of an assignment.

http://www.contractoruk.com/news/0010392hmrc_defeats_reed_158m_temps_tax_case.html

It’s not just REED

Take a look at this Blog on Accounting Web http://www.accountingweb.co.uk/anyanswers/self-employment-travel-and-subsistence-issue-compliance-office

This Blog is about a construction worker working 200 miles from home and claiming travel, accommodation and subsistence. HMRC are seeking to disallow these expenses.

Do you have any advice or comments to share?

Has your business been affected by this issue? What happened? What were circumstances? How did you ensure compliance with HMRC rules?

steve@bicknells.net