Our client's trade is within the removals business and covers all of the United Kingdom. Overnight stays for the employees are quite common and we have considered round sum amounts to cover board and lodge to be adequate and mutually convenient (£32 city, £27 country). The removal men have been in the family business for many years and invariably profit by a few pounds each time owing to their knowledge built up over the years of 'good deals' and in some cases staying at friends/relatives' homes.
Our client's trade is within the removals business and covers all of the United Kingdom. Overnight stays for the employees are quite common and we have considered round sum amounts to cover board and lodge to be adequate and mutually convenient (£32 city, £27 country). The removal men have been in the family business for many years and invariably profit by a few pounds each time owing to their knowledge built up over the years of 'good deals' and in some cases staying at friends/relatives' homes.
We are advised following a PAYE inspection visit that all subsistence must be 'vouched' and claims limited to costs incurred. Needless to say, a settlement is being sought.
In researching this matter, we came by the Revenue's own 'Travelling and Subsistence Allowances' (leaflet FAO TS8), which the editor reproduced in the 'Loose Ends' column of Taxation, 5 April 2001 at page 24. Whilst the extremely generous bed and breakfast allowance would not be exceeded, the 'night subsistence allowance' of £21 per night plus 'day subsistence' of either £4.25 or £9.30 means the 'round sums' paid by my client are in line with the Revenue's subsistence rates – without even having to account for the actual expenditure. Why should one rule apply to Revenue staff and a different compliance régime for others?
In addition, what is to stop my client paying the same night and day subsistence rates to his employees as a legitimate tax-free perk – in line with the Revenue's allowance (i.e. in addition to the actual reimbursement of expenditure within the Revenue guidelines for bed and breakfast)? For that matter, why does the Revenue not publish these rates in its booklet 480 – 'Expenses and Benefits Guide'? Surely this is a contravention of the Taxpayer's Charter as not treating all taxpayers with equal fairness. It also smacks of one rule for Government ministers running two Jaguars tax free whilst Joe Public faces increasing tax burdens for essential business mileage.
(Query T15,792) – Disgusted from Ealing.
The first action 'Disgusted from Ealing' should take is to appeal against the ruling by the PAYE inspection team that all subsistence must be vouched and claims limited to costs involved. Only payments above certain limits are subject to tax if not supported by receipts.
On behalf of a client, I recently contacted the Inland Revenue concerning payments to long distance lorry drivers who are obliged to take 12-hour rest periods away from home. The information provided – later backed up by reference to the Inland Revenue's Schedule E Manual at paragraph 66105 – was as follows:
(1) It is up to the employer to determine the nature of payments made to an employee.
(2) The subsistence element of payments may be made in full provided that –
(i) documentary evidence is available to show that the employee concerned had spent the night away from home and his normal place of employment and incurred extra cost in so doing;
(ii) the amounts paid were no more than a reasonable amount to cover the extra costs involved.
The expense allowance is reviewed annually and, with effect from 1 January 2001, the overnight rate for the United Kingdom is £23.50.
As long as documentary evidence in (2)(i) is held – e.g. driver's log sheets, parking records and itinerary records, etc. – the payment can be made tax free with no need to request receipts or vouchers.
Special rates can be negotiated with the Inland Revenue concerning drivers who spend time abroad.
In addition to the overnight allowance the employer may, if he so wishes, make a contribution towards the midday meal costs of long distance drivers. Again, the tax-free amounts are set down on an annual basis.
The employer is not, of course, bound by the above figures but if increased payments are to be made then the excess must be taxed unless –
(1) the payments made are supported by receipts; or
(2) the arrangements under which such payments are made have received formal approval from the Revenue.
In the case of (2), formal approval will not be received if there is any element of 'bounty' included in the payment.
Once the level of expenses has been agreed, whether in the sums set out in the Inland Revenue manuals or a higher figure, the business should seek a dispensation for P11D purposes.
It should be emphasised again, however, that if an element of the expense payment is taxable, it is only the excess payment over and above the Inland Revenue guidelines that is subjected to tax, not the whole payment.
It is more and more common for drivers to have lorries with sleeper cabs. In such cases, the Inland Revenue accepts that a figure of 75 per cent of the normal rate may be paid to the driver – i.e. currently £17.66 per night.
It appears that the amounts being paid are not considerably higher than the Inland Revenue guidelines and any additional tax payable would be low in comparison to a charge on the whole expense payment. Whilst it is annoying to see that Inland Revenue staff are receiving higher sums, any challenge in the courts would be an expensive business with, probably, little chance of success. – Carryduff.
Reference should be made to Inland Revenue Statement of Practice SP16/80 which concerns relief for lorry drivers' subsistence. Its terms seem equally applicable in the present instance. As regards evidence of expenditure, the statement says that relief depends 'mainly' on the bills and vouchers produced by drivers but adds 'if exceptionally they are unable on any occasion to obtain bills or receipts, they must make a note at the time of the date, place and amount spent'. That gives an alternative meaning to 'vouched'.
The 'day subsistence' of £9.30 quoted by 'Disgusted from Ealing' is also mentioned in Query T15,779 in Taxation, 29 March 2001 and appears to have been well publicised. Incidentally, a reader's suggestion that dispensations be applied for, could reduce the hassle for the removal men, although they should accept the need to sacrifice the so-called 'perks'. It has to be recognised that tax-free opportunities have been progressively reduced, even when well established, as was shown for newspaper printers in R v Commissioners of Inland Revenue ex parte National Federation of Self-employed and Small Businesses Ltd [1981] STC 260. The Revenue can properly refrain from pursuing the past but cannot be expected to acquiesce in ongoing irregularities. – M.C.N.
