Is your Expense Checking System up to scratch? Reply


Angry tax inspector looking serious and determined

HMRC have guidance in EIM30275 and EIM30270 which set out what they expect, so for example, this is what they expect the expense checking process to be for a one man company

Model D – One man company

Single employee of a one man company working at a series of temporary workplaces. Claiming benchmark scale rates.

Employee maintains a diary and time sheet to confirm occasions when travelling in the performance of their duties and retains receipts in respect of subsistence costs.  An independent third party performs regular monthly checks on a sample of the employees’ records to confirm that the relevant conditions for the exemption were met on each occasion. Checks are performed at random and the employee does not know in advance which journeys will be checked.

Independent third party would generally mean your accountant, but as HMRC encourage people to file themself many One Man Companies won’t have an accountant, so who does the checking then?

Lets see what bigger companies need to do?

Model C – Small employer

Small employer with less than 100 employees who regularly travel in the duties of their employment. Employer pays benchmark rates

Employer checks a random 10% of all claims.  Checks to be independently checked and authorised, and vouched by reference to employee diaries, work schedules and time sheets to confirm that employees were travelling in the performance of their duties on the date of the claim, and receipts to demonstrate that employees had in fact incurred costs whilst travelling. Employees should be aware that they might be subject to review at any time, and not be given notice that any particular claim will be subject to review.

The employer will have to be able to satisfy HMRC that their 10% sample really is a random one – for example, every 10th claim received.  HMRC will accept the evidence produced by such an exercise as being random for the purposes of confirming that employees meet the qualifying conditions for payment of the scale rate.

Employees required to retain receipts for a period of twelve months from the date of expenditure.

I think for small employers this would probably work and is achievable.

What system do you use? Do you think HMRC would accept your system?

steve@bicknells.net

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