HM Revenue and Customs (HMRC) is to target company vans and subsistence allowances when auditing company records, as the tax authority places renewed emphasis on benefits and rewards labelled as taxable benefits.
Paul Tucker, partner at Smith and Williamson, revealed that benefits professionals were more likely to find themselves the subject of HMRC investigation and that “allowances and vans are easy targets for the taxman to challenge”.
Mr Tucker, speaking at the Chartered Institute for Personnel and Development (CIPD) Reward Conference, said: “If the taxman visits your organisation there’s a fair chance they will want to ask you some questions because what they tend to do now is look at things on a risk basis.
“They will want to make sure that you have these procedures in place, those policies are being followed and you can demonstrate that they are being followed.
“And if they need to pose questions about them, they’ll want to pose questions to people who are operating them and perhaps designed them.”
Mr Tucker added that HMRC’s approach had changed in recent years, intimating that firms used to expect a one-off visit from the tax authority every five or six years.
“But they’ve cut back on staff and they are being much more scientific about how they approach things, for example, over the last few years they looked at the restaurant trade and they’re always looking at construction trade.
“They will look at certain industries and pool their knowledge for this risk based approach. And if something high profile has been announced in your organisation (such as a big batch of redundancies), they may ask if you are doing that right.”
Tucker citied two instances where SME employers could generate a significant unpaid tax bill through the payment of subsistence allowances or the unmonitored use of company vans:
“If you do pay subsistence allowances to your employees they should be agreed as part of your dispensation with the Revenue.
“You need to be able to demonstrate to the Revenue why they are being paid, that they comply with the dispensation got from the Revenue and that the employee is actually incurring an expense.
“If an employer pays £10 for lunch (instead of HMRC’s recommended £5) but not monitored it, they will want you to demonstrate why you are giving that expense, that it is being policed and it’s a reasonable amount.”
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