Bob Jones explained:
Over the last few years I have noticed that advice given by front line umbrella staff has not always been entirely accurate and looking at the expense policies contained within some umbrella websites has enforced that view.
We are, I think, all aware that HMRC are becoming active in the umbrella market and it is essential that umbrella’s are squeaky clean. This means not only ensuring that the front line staff give accurate information but also that behind the scenes audit requirements are met.
When HMRC come to call they will be looking at the correct operation of the expense rules. In particular they will pay close attention to workplace assessment to ensure that permanent/temporary workplaces are correctly identified. This means that front line staff must obtain accurate information and give the correct advice to the contractor.
In addition there needs to be an audit trail to show that the status of the workplace is monitored to ensure that tax free travel expenses are granted only where the workplace is temporary in accordance with the law. There is evidence that some umbrellas are not paying sufficient attention to detail in a number of areas but particularly:
1 Where there is a change in workplace without there being a substantial affect on the journey and
2 Where a person returns to the same workplace after a period of time.
In both these instances the 24 month rule can come into play and loss of tax will have to borne by the umbrella.
The training course will cover the basic charging provisions (which bring expense payments within the charge to tax), the rules regarding general expenses incurred wholly, exclusively and necessarily in the performance of the duties of the employment, travelling in the performance of the duties of the employment and, the topic that is of major interest to umbrellas, travelling to temporary workplaces. The latter will include detailed examples and explanations of all aspects with specific emphasis on the 24 month rule – a rule that causes HMRC problems never mind umbrellas. In addition the course will cover dispensations, scale rates (benchmark and other rates) and the need to commit HMRC to an agreed audit trail.
Prior to the visit I will need know a little about the background to the umbrella, e.g. whether the umbrella specialises in a particular market, whether there are foreign issues, seasonal workers etc. It may be that the existing staff have problem areas in which case they will be encouraged to bring these out into the open so that the course can be tailored to fit.
During my latter years as an employee of HMRC I managed one of the enquiry teams that enquired into literally hundreds of travel expense claims. In the 70’s I was an in house tutor at the Manchester Training Centre, in the mid 90’s I presented the self assessment agents seminars over a two year period and during my career have represented the then IR and latterly HMRC at over 100 Commissioners Meetings.
I am conscious that in order to train staff it means taking them away from their duties so the course will be intensive and last about 3 hours. There will be an optional follow up telephone helpline and if required a follow up audit and report.
The course, in a slightly modified state, will also be useful for those firms who are looking after the day to day management of personal limited companies. Dispensations are difficult to obtain for one man companies and as a consequence HMRC expect submission of forms P11D – another potential minefield with penalties to boot.
For more information visit www.internet-taxation.co.uk or email firstname.lastname@example.org or telephone 01244 310547 (quoting 'Shout99 report').
Susie Hughes © Shout99 2010