If you are in Swanley, Bromley, Kent and London areas, please do contact us at Adiva Accountants in Swanley, for further guidance on the employee expenses exemption and your expenses policy.
For both travelling and subsistence expenses to be treated as an exempt expense, it is necessary to have been incurred in business travel. This is also the condition in the use of business mileage rates for cars and vans.
A business journey is one which either involves travel:
- from one place of work to another or
- from home to a temporary workplace or vice versa
However, journeys between an employee’s home and a place of work which he or she regularly attends are not business journeys. These journeys are ‘ordinary commuting’ and the place of work is often referred to as a permanent workplace. This means that the travel costs to a permanent workplace have to be borne by the employee.
The term ‘temporary workplace’ means that the employee attends the place for a limited duration or a temporary purpose. However, some travel between a temporary workplace and home may not qualify for relief. This is if the trip made is ‘substantially similar’ to the trip made to or from the permanent workplace. The HMRC considers as ‘Substantially similar’ a trip using the same roads or the same train or bus for most of the journey.
There will be many variations of types of journeys undertaken by employees so ensuring that it is a business journey is critical. More so as the term ‘travel expenses’ includes the costs of travel together with any subsistence expenditure and other associated costs that are incurred in making the journey (e.g. toll or congestion charges).
The new regime
Regardless of whether the employers use scale rates or specific reimbursement, the new regime requires them to have a checking processes in place. If there is a lack of evidence that amounts paid to employees represent business expenses, the business may incur penalties for errors in completion of P11Ds. In some cases, if the expenses are non-business expenses the employer may be responsible for PAYE and NIC underpayments.
If approved benchmark or bespoke rates are used, the employers must have a checking system in place. This is to ensure that the employee is incurring and paying the amounts in respect of expenses of the same kind, and that the tax relief would be allowed. Exemption is also conditional on neither the payer, nor anyone operating the checking system, suspecting or reasonably being expected to know or suspect that the employee had not incurred an amount in respect of the expense.
The HMRC have issued guidance on what checking systems they will expect employers to operate. We can assist you with this matter or in applying for bespoke rates so please contact us for more information.
The business mileage rates
The main travel and subsistence expenses for many employees are their costs in using their own car or van for business travel. Many employers and their employees use the statutory mileage allowances known as ‘authorised mileage allowance payments’ (AMAPs). These are scale amounts that employers can pay to employees using their own vehicle for business travel. The scale rate for cars and vans is 45p per mile for up to 10,000 miles in the tax year and 25p per mile above this. AMAPs are a separate statutory regime and do not come within the new exemption regime.
If the employer provides a vehicle to the employee, the fuel advisory rates can be used to reimburse fuel costs incurred in travelling on business. These rates are updated quarterly throughout each tax year.
If your company operates in Swanley, Bromley, Kent and London areas, Adiva Accountants in Swanley can advise you on the business mileage rates. Please do not hesitate to contact us at Adiva Accountants in Swanley.
The dispensation system instead of the employee’s actual costs in certain circumstances allowed amounts based on scale rates to be paid or reimbursed. The scale rates are generally for travel and subsistence expenses. They consist of round sum allowable amounts for specific circumstances.
There were two key types of scale rates available for use by an employer:
- ‘benchmark’ rates
- ‘bespoke’ rates
As part of the changes, these options are still available as detailed below.
The benchmark rates
The benchmark rates are a set of maximum reimbursement rates for meals. These round sum amounts have now been included in Regulations. So, where relevant qualifying conditions are met, they can be used by employers for payment or reimbursement of employees’ expenses.
These rates apply only if the employee incurs expenditure in the course of ‘qualifying business travel’ as follows:
- one meal allowance per day paid in respect of one instance of qualifying travel, the amount of which does not exceed:
- £5 where the duration of the qualifying travel in that day is 5 hours or more
- £10 where the duration of the qualifying travel in that day is 10 hours or more, or
- £25 where the duration of the qualifying travel in that day is 15 hours or more and is on-going at 8pm or
- an additional meal allowance not exceeding £10 per day paid where a meal allowance a. or b. is paid and the qualifying travel in respect of which that allowance is paid is on-going at 8pm.
The bespoke rates
These are rates negotiated and specifically agreed with HMRC in writing. The business has to apply to HMRC, if it wants to pay bespoke rates for meals or other types of expense.
There are transitional arrangements for bespoke scale rates. This means that employers can continue to use any existing rates agreed since 6 April 2011. This till the fifth anniversary of that agreement subject to re-confirming information to HMRC.
If your company operates in Swanley, Bromley, Kent and London areas, Adiva Accountants in Swanley can advise you on the benchmark and bespoke scale rates. Please do not hesitate to contact us at Adiva Accountants in Swanley.
In order for a reimbursed expense to be treated as an exempt payment, an employer needs to put himself in the position of the employee. The employer then needs to decide whether that expense would have qualified for full tax relief to the employee. There is no explicit requirement in law for a checking system, but to an employer will have to operate a checking system.
An employer should consider the following:
- setting out a corporate policy of which type of expenses are reimbursable and the need for those expenses to be reasonable
- requiring the completion of a standard expense claim forms
- the need for any expense claim to be supported by a receipt
- making checks on expense claims
- requiring a senior person to authorise the claims
Receipts are required as it is expected that HMRC will expect for a checking system. And also, that there is evidence an expense has actually been incurred by the employee.
HMRC have introduced an exemption regime for employee expenses. If the necessary conditions are met, the expenses are tax exempt and non reportable on form P11D. If your company operates in Swanley, Bromley, Kent and London areas, Adiva Accountants in Swanley can provide guidance on these changes.
This factsheet covers below the operation and reporting of expenses and benefits. There is a new exemption regime for such expenses. As long as the necessary conditions are met, there is no need to report these items on P11Ds. To meet these conditions the business must be satisfied that the employee would be entitled to full tax relief on expenses reimbursed to the employee.
The new regime
In the past when an employee incurred expenses they were treated as earnings. Then the employer reported them on the annual form P11D. The employee was then allowed to make a claim for tax relief to the extent that the expenses were business expenses. Later dispensations were introduced as a way of simplifying the process. So, the employers could apply to HMRC to dispense with the need to report certain expenses on the P11D. This removed the need for the employees to make claims.
If the HMRC were satisfied that the employee would have been entitled to full tax relief on that payment or benefit, the dispensation was given. Many employers applied and used dispensations, but many smaller or unrepresented employers did not do so.
From 6 April 2016, all existing dispensations came to an end and businesses will no longer be able to apply for a dispensation. A new exemption has been introduced instead. This means that businesses will not have to pay tax and NIC on paid or reimbursed expenses payments, or put them on a P11D. The new exemption places the onus on employers to determine whether employee expenses are fully deductible for tax purposes.
The types of expenses
The main types of expenses to which the exemption applies are:
- travel and subsistence
- fees and subscriptions
- business entertainment
All other non-allowable expenses will still be reportable on a P11D and/or subject to PAYE (and possibly NIC). Same as before employees will be able to claim tax relief in respect of unreimbursed business expenses.
This new exemption will not apply to expenses or benefits provided under a relevant salary sacrifice. This includes any arrangement where an employee gives up the right to receive earnings in return for tax free expenses payments. Or where the level of their earnings depends on the amount of any expenses payment.
If your company operates in Swanley, Bromley, Kent and London areas, Adiva Accountants in Swanley can advise you on the changes to P11Ds. Please do not hesitate to contact us at Adiva Accountants in Swanley.
The operation of PAYE under RTI can be a difficult and time consuming procedure for those in business. If your business is in Addington, Bromley, Kent and London areas and you would like to discuss any aspect of RTI in more detail, please do contact us at Adiva Accountants in Addington.
HMRC applies penalties where employers fail to meet their RTI filing and payment obligations. So, late filing penalties apply to each PAYE scheme, with the size of the penalty based on the number of employees in the scheme. Monthly penalties of between £100 and £400 may be applied to micro, small, medium and large employers as shown below:
- 1-9 employees – £100
- 10-49 employees – £200
- 50-249 employees – £300 and
- 250 or more employees – £400
Regardless of the number of returns submitted late in the month, each scheme is subject to only one late filing penalty for each month. There will be one unpenalised default each year with all subsequent defaults attracting a penalty. HMRC have confirmed that, they will not issue late filing penalties automatically when a deadline is missed. Instead they will ‘take a more proportionate approach and concentrate on the more serious defaults on a risk-assessed basis.’
Additionally, HMRC charge daily interest too. Interest is charged on all unpaid amounts from the due and payable date to the date of payment. They may also charge penalties to employers who fail to pay their PAYE liabilities on time. These penalties are ‘risk assessed’ and range between 1% and 4% of the amounts paid late. The first late payment will not attract a penalty.
The Real Time Information requirements are wide ranging and can be a burden on the employers. If your business is in Addington, Bromley, Kent and London areas we, at Adiva Accountants in Addington, can help you to set up and run the payroll for you.
We cover below details of how payroll information has to be submitted to HMRC under Real Time Information (RTI).
RTI introduction
RTI requires the employers or their agents to make regular payroll submissions for each pay period during the year. These submissions detail payments and deductions made from employees each time they are paid. The two main types of returns which an employer needs to make are detailed below.
Full Payment Submission (FPS)
The Full Payment Submission (FPS) must be sent to HMRC on or before the date employees are paid. This submission details pay and deductions made from an employee. You can make only one FPS submission a month.
Employer Payment Summary (EPS)
Employers may also have to make a further return to HMRC each month (EPS) to cover the following situations:
- where no employees were paid in the tax month
- where the employer has received advance funding to cover statutory payments
- where statutory payments are recoverable (such as SMP, OSPP and ShPP) together with the SMP NIC compensation payment or
- where CIS deductions are suffered, which could be offset (companies only)
HMRC will offset the amounts recoverable against the amount due from the FPS to calculate what should be payable. The EPS needs to be submitted to HMRC by the 19th of the month. This way it can be offset against the payment due for the previous tax month.
The payments to HMRC
Please note that under RTI, HMRC are aware of the amount due to them on a monthly/quarterly basis. This will be part of the information reported to HMRC through the FPS and EPS returns.
So, HMRC will expect to receive the PAYE and NIC deductions less the amounts recoverable, each month or quarter.
Year end procedures
At the end of the tax year a final FPS or EPS return must be made to advise HMRC that all payments and deductions have been reported to HMRC. This is called Final submission.
Wages
It is not possible under RTI to put through wages at the year end of the business and assume this has been paid throughout the year. So, you cannot utilise a family member’s national insurance lower earnings limit which gives them a credit for state pension and statutory payment purposes. So, wages should be paid regularly and details provided to HMRC through the RTI system on a timely basis.
There are scenarios where it is impractical to report in real time. So, the regulations allow up to an additional seven days for reporting the payment in specified circumstances.
Please do contact us at Adiva Accountants in Addington, if you would like any further help or advice on payroll procedures.
Many business owners find the payroll procedures difficult and time consuming. If your business is in Bromley, Kent and London areas we will be happy to show you how to operate PAYE correctly, or to carry out your payroll for you. So please do not hesitate to contact us at Adiva Bromley Accountant.
The Automatic enrolment process makes the employers to automatically enrol ‘workers’ into a work based pension scheme. The scheme must start from the ‘staging date’. The main duties are:
- assess the types of workers in the business
- provide a qualifying automatic enrolment pension scheme for the relevant workers
- write to most of their workers explaining what automatic enrolment into a workplace pension means for them
- automatically enrol all ‘eligible jobholders’ into the scheme and pay employer contributions
complete the declaration of compliance and keep records
HMRC impose penalties on employers who fail to:
- make the online submissions on time
- pay the liabilities on time
- keep the necessary records
- operate PAYE or NI correctly
- make the correct statutory payments
- provide HMRC or the employees with the relevant forms on time
It is very important that the employers comply with all the regulations.
You will need to complete the following forms or maintain the equivalent digital records:
P11 Deductions working sheet
This form (or a computer generated equivalent) must be maintained for each employee. It details their pay and deductions for each week or month of the tax year.
P60 End of year summary
This form has to be completed for and given to all employees employed in a tax year.
P45 Details of employee leaving
This form needs to be given to any employee who leaves and details the earnings and tax paid so far in the tax year. New employees should let you have the form P45 from their previous employer.
Starter Checklist
When a new employee starts, you will need to advise HMRC so that you can pay them under RTI. Some of the necessary information may be obtained from the P45 if the employee has one from a previous job.
The tax and NI should be paid to HMRC by the 19th of the month following the payment. Tax months run from the 6th to the 5th of the month. So, if an employee was paid on 25 July (tax month being 6 July to 5 August) the tax and NI would need to be paid over to HMRC by 19th August.
If the PAYE and NI are paid electronically, they would need to be paid over to HMRC by the 22nd of the month following the payment.
If the average monthly payments are less than £1,500, the employers are allowed to pay quarterly rather than monthly.
Large employers, with more than 250 employees, must pay tax and other deductions electronically.
If your business is in Bromley, Kent and London areas we, at Adiva Bromley Accountant, can help you to set up and run the payroll for you.
NI is payable by the employee and the employer on the employee’s gross pay for a particular tax week or month. Different from tax, NI is calculated on a non-cumulative basis. Also, the NI can be calculated using the HMRC Basic PAYE tools or other payroll software.
You can use the calculators provided on HMRC’s website or other payroll software, to be able to calculate the tax and NI due in respect of your employees.
The tax which is due for a particular employee is calculated by reference to their gross pay with a deduction for their tax-free allowance. The tax-free allowance would reflect their circumstances (using their coding notice and the pay date). The remainder of the pay is subject to tax and this is calculated using the Basic PAYE tools or other software.
Tax is generally calculated on a cumulative basis, looking at the individual’s circumstances for the tax year to date.
We will cover below what you need to do to set up and run your payroll. If your business is in Bromley, Kent and London areas we, at Adiva Bromley accountant, can help you to set up and run the payroll for you.
New Employer
If you want to set up a Pay As You Earn (PAYE) scheme with HMRC it is necessary to contact the New Employer’s Helpline on 0300 200 3211. Alternatively, you can register online via the GOV.UK website.
As an employer, you will be responsible for operating PAYE and National Insurance (NI). You need to be aware of certain statutory payments you may have to make from time to time. These statutory payments include:
- statutory sick pay (SSP)
- statutory maternity pay (SMP) and
- ordinary statutory paternity pay (OSPP)
- shared parental pay (ShPP)
The GOV.UK website has a vast amount of information detailing the operation of PAYE together with online calculators. These can be accessed as part of the HMRC Basic PAYE tools.
You can request HMRC to send you several booklets and tables to enable you to make the relevant deductions and payments to your employees. However, the majority of employers use the HMRC Basic PAYE tools or other payroll software.
The reporting of Real Time Information
Employers, or their agents, are generally required to make regular online payroll submissions for each pay period during the year. These submissions should be done on or before the date they are paid to the employees. They detail payments and deductions made from employees.
More detailed guidance and information on operating your payroll under Real Time Information can be found by clicking here.
If your business is in Bromley, Kent and London areas we, at Adiva Bromley Accountant, can help you to set up and run the payroll for you.
