Month: October 2017

Many businesses spend substantial monies on intangibles like building websites, advertisements etc and the question crops up how to treat them for taxation purposes.

Sole trader/ partnership	Not Allowed
Limited Companies	Allowed under under `Corporate intangible assets regime`.   Tax deduction follows the accounting books. See HMRC toolkit: Capital Vs Revenue Page 4.

 

Moral of the story:

• Use the toolkits regularly.
• Please use the current year’s toolkit

As always the starting point for all questions relating to employee benefits is A to Z on gov website, link given below:

https://www.gov.uk/expenses-and-benefits-a-to-z

The question in hand, an employer a construction company (shop fitters) gives cash sums to employees when they are staying overnight away from home for accommodation  and meals

C – Cash Sum payments to employees

https://www.gov.uk/expenses-and-benefits-cash-sum-payments

I have listed below two main types of expenses paid by employers – private and business. Business expenses have been further categorised in four types.

	Type	Description	Tax Liability
A	Private expense	You pay employees private expense. Always considered as employee earnings.	Tax + NIC
B	Business Expenses
1	Reimbursement of actual expenses	You pay expenses on submission of expenses receipts by employees. You will need to apply for exemption with HMRC. The Application form is simple with additional guidance.	No Tax or NIC
2	Round  Sum Allowances	You pay an employee regardless of how they spend the allowance.	Tax on full amount NIC :  Allowance minus expenses
3	Scale rate payments	You pay at a level agreed with HMRC. The employee has to actually spend the scale rate payment on business expenses.   Again the process of applying for exemption is same as in point 1.	No Tax or NIC
4	Special arrangements with HMRC   Certain employments have special rules for taxation of employment income see EIM 50000 onwards	Construction industry workers are covered under a special scheme – `Working rule agreements` see below EIM 71300.	No Tax or NIC for payments up till the approved rates

EIM 71300: working rule agreements

• Applies to employees in construction and allied industries.
• Applies only to travel and lodging allowances.
• Apply only were payments made according to strict terms and conditions of this rule, for these details go to HMRC manual EIM 71300.
• Neither employer nor the employee need to be a member of any federation or trade union.

 

Conclusion:

It’s advisable to apply for scale-rate payments exemption with HMRC as per point 3.