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Travel and Subsistence Update

Travel and Subsistence Update. Samantha Davies. Contents. Types of Schemes Operating Travel and Subsistence Schemes - Timeline Matters Affecting Compliance Wondering What to Do? Other Considerations. Types of Schemes Operating – Salary Sacrifice.

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Travel and Subsistence Update

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  1. Travel and Subsistence Update Samantha Davies

  2. Contents • Types of Schemes Operating • Travel and Subsistence Schemes - Timeline • Matters Affecting Compliance • Wondering What to Do? • Other Considerations

  3. Types of Schemes Operating – Salary Sacrifice • Temporary workplace and other business expenses • Savings shared by altering relationship between salary sacrifice and expenses payments • 11:10 = 50% • 12:10 = 2/3 • 13:10 = 80% • Preserve NMW • Preserve Lower Earnings Limit for NIC • Hybrids and various non-compliant arrangements • Build-up method • Reduced contractual hours • Employer NIC paid by worker • Office Holders

  4. Types of Schemes Operating – Pay Day by Pay Day • Post Cordant/January 2011. Does not involve Salary Sacrifice • Automatic tax and NIC relief by ignoring value of employee-incurred expenses in calculations • Need independent Expenses Co to charge employee a fee for the service • HMRC don’t agree with Barrister interpretation for NIC and won’t grant a dispensation - statements July 11 and August 12 • GLA may refuse or revoke license – FS Commercial November 2012 • Hybrids and various non-compliant arrangements • Holiday pay adjustment • Expenses Co only

  5. Travel and Subsistence Schemes - Timeline • 1998 Change in tax rules 1998 – improvement for ‘site based workers’ • 2008 Consultation on tax relief and overarching contracts • 2009 Benchmark Scale Rates for Day Subsistence • 2010 Consultation on NMW Regulations and Cordant ‘appeal’ (lost) • 2011 (Jan) NMW Regulations altered – expenses not included in NMW • 2011 (Jul) HMRC state view that Pay Day by Pay Day Models not compliant • 2012 (Jan) Reed Personnel Judgement published (lost) • 2012 (Aug) HMRC state dispensations not relevant to Pay Day by Pay Day • 2012 (Nov) FS Commercial Judgement in relation to GLA License (lost) • Since December 2008 HMRC have made 15 significant amendments to their internal guidance manuals covering the way they deal with dispensations and subsistence expenses.

  6. Matters Affecting Compliance • Over-arching Contract of Employment • 24 Month Rule • Temporary workplace • Eligible Expenses • Explicit Claims Procedure • Audit • Dispensation • Sampling Exercise • Benchmark Day Subsistence • Actual Costs • Clear communication and contract defining entitlement to pay • Valid Salary Sacrifice or Effective Pay Method • National Minimum Wage Check • Employer Expenses Payments don’t count for NMW

  7. Wondering What to Do? • Existing Salary Sacrifice Arrangements • Bring ‘up to date’ in the context of HMRC views/guidelines • Is your contract of employment effective and fully understood? • Ensure you have explicit claims for expenses by workers • Obtain receipts where they are available – by audit sample at least • Consider how pay entitlement is explained – does the worker understand? Are you being fair? • New Salary Sacrifice Arrangements • Take the right advice • Be fair and clear with workers • Provide detailed information to HMRC for a dispensation • Invest in compliance

  8. Wondering What to Do? • Existing Pay Day by Pay Day Models • Make sure you understand the risks • Have you taken legal advice? • Ensure the only point for debate is the key technical principles; i.e. take the steps in relation to contract and expenses stated above • The arrangements must be transparent and fair for the worker • New Pay Day by Pay Day Models • Make sure you understand the risks – they are significant • Obtain legal opinion and make sure you discuss and document all relevant facts • Implement arrangements that are faultless in their administration including detailed, explicit expense claims • Submit forms P11D where any payments are not subject to tax and NIC

  9. Wondering What to Do? • Existing and New Umbrella Arrangements (Employed Models) • Make sure you and your workers understand the pay entitlement and calculations • Ensure that NMW and the Lower Earnings Limit are met • Is holiday pay dealt with appropriately? • Do workers submit regular claims that match any expenses paid or subject to relief? • Check dispensations held (you will need to see the application too) • Has the Umbrella company taken appropriate advice? • In relation to GLA workers, it is unlawful to use an Umbrella Company that does not have a current GLA license • Ensure you have a contract that represents the true agreement between you • Have a contingency plan

  10. Other Considerations • Real Time Information (RTI) • HMRC Construction Industry Scheme • Pensions Auto-enrolment • Wider tax reviews by HMRC • Professional Fee Insurance

  11. Samantha DaviesPartner, RSM Tenonsamantha.davies@rsmtenon.com07528 970067

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