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Washed out

Our haulage company client transports a number of products including contaminated goods throughout Europe. Given the nature of the goods transported, it is essential that each lorry is washed prior to its reuse, else the next load, (containing a different product), will be returned and the haulage company will lose out on the sale.

The lorry drivers submit their washing expenses at the end of the week. Very few of these expenses will have matching receipts, because of:

Our client is currently undergoing a pay-as-you-earn review and the Inspector is insisting on original receipts or is deeming that these expenses are the equivalent of net pay and therefore income tax and Class 1 National Insurance are assessable on these amounts. Given that the loads in question include contaminated goods, it is essential that the lorries be washed out and, whilst the Inspector accepts this, he still refuses to acknowledge the expense claims.

Readers' views and comments are much appreciated.

(Query T16,480) — Stuck in the Middle.

The client of 'Stuck in the Middle' should insist on receipts for all expenses that are to be reimbursed and should advise his drivers that he will not pay unless receipts are produced. Perhaps he could, in addition, give the following guidelines to the drivers and, if possible, the wash houses.

Unless all this is done, how can the Inland Revenue and Customs and Excise make sure that everything is correct? How can business even function?

We then come to the real world where receipts are not always obtained, where expenses are authorised without receipts.

The mere fact that receipts are not obtained does not turn the amounts into disguised remuneration. The Inspector has accepted that the cleaning must be done. What he will be concerned to establish is that the drivers have incurred the expense and are not, for example, cleaning the vehicles themselves and claiming additional amounts of remuneration. After all, the Inspector will have come across occasions where amounts described as 'cleaning allowance' or something similar have, in fact, been disguised remuneration.

'Stuck in the Middle' now needs to establish some facts to persuade the Inspector to accept the bona fides of the reimbursements. To do this, he or she must:

These are only some of the facts that need to be established before negotiations go ahead. If the Inspector is unwilling to move, the client can continue to protest through the issue of determinations and the Commissioners if necessary. That will, however, depend upon the strength of the case.

For the future, however, the client should establish a more robust policy of reimbursement. After all, it is the company and not the individual drivers who suffer if things are not treated correctly. — J.W.G.

A comparison in respect of expenditure by lorry drivers can be found under part 3 of the Inland Revenue's Statement of Practice SP16/80, entitled 'Lorry drivers — relief for expenditure on meals'. This states:

'Evidence of expenditure — The amount of relief which can be allowed depends mainly on the bills and vouchers which can be supplied by a driver in support of his claims. Employees who consider that they may have a potential claim should ensure that bills, receipts, etc. are available in support of any claim for relief for the current tax year and future years; but 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. An expenses deduction cannot be given in the absence of evidence of expenditure and tax districts will not accept estimated figures of outgoings.'

Obviously the nature of the washing expenses falls short of money spent on meals, as they are not a daily requirement!

The Revenue's Employment Income Manual under paragraph 66175, refers to 'Tax treatment of lorry drivers: Meals: Evidence required' and this advises that:

'Where you decide that a deduction for meals can be permitted in principle, you will need to obtain appropriate evidence to calculate the amount of the deduction.

'Determine the final amount of any deduction for a particular year by reference to the expenditure for meals shown by bills, receipts, etc., submitted by the employee, less any contribution in cash or otherwise from the employer. Estimated amounts should normally be excluded from the computation ... Examine cases individually. Do not apply the results of a review of a small sample of cases to all the drivers employed by one employer.

'Most cafés and restaurants employing staff will give customers at least a till receipt and so there should normally be no difficulty in obtaining vouchers for expenditure. Where, exceptionally, bills or receipts are not given, you may accept a personal record (for example a diary) showing the place visited, the date of the visit and the amount of expense incurred, but only for small amounts and as an occasional substitute for bills or receipts, not as a driver's sole record [my italics].'

So I am afraid that even Sherlock Holmes would have had problems here in trying to prove the case. Quite simply, without evidence there will be no case to prove!

Issue: 3976 / Categories: