Hi, I'm new to this forum and hoping it will provide some clarity on a query I have.
I am self-employed (working mum, with one-client), AAT Qualified Bookkeeper, currently studying AAT Level 3 Advanced diploma in Accounting Qualification, with only the synoptic to complete. HMRC - MLR.
My question I have is that during financial year 2019-2020 the Director submitted travel expenses which were reimbursed as they were thought to be business travel (the company does not currently payroll expenses). Now it transpires that they were private travel. I have spoken with the HMRC and they have advised that I should submit and EYU to rectify the situation as they should be treated as earnings (the travel was arranged by the director, and paid by the director, with the company reimbursing), however, the accountants have already prepared and finalised the year-end accounts for 2019-2020 and advised that no changes can or should be made to YE March 2020 financial statements. They have suggested that any changes will have to go through YE 2021, or to submit a P11d for the benefit. When I suggested this (preparing a P11d) on another call to the HMRC they advised this it not the correct procedure and reverted back to submitting a EYU.
So, I'm a little confused with the HMRC advising one thing and the accountants advising another. All I want to ensure is that the employer/employee deduct/pay the correct Tax and NI, one way or another.
I have seen suggestions on posting to the DLA but I would appreciate advice on this as all these transactions took place in 2019-2020.
I feel like I'm going round in circles, so would really appreciated some help,
I completed my AATQB at the end of 2017, and then decided to further my qualification by adding the modules to complete the AAT Level 3 Accounting Qualification, but with one thing or another, I haven't been able to complete fully, but in the lock-down I have been revising for the synoptic.
When I spoke with the HMRC I completely felt like it was their way or no way, or that's the way it came across!
My question I have is that during financial year 2019-2020 the Director submitted travel expenses which were reimbursed as they were thought to be business travel (the company does not currently payroll expenses). Now it transpires that they were private travel. I have spoken with the HMRC and they have advised that I should submit and EYU to rectify the situation as they should be treated as earnings (the travel was arranged by the director, and paid by the director, with the company reimbursing), however, the accountants have already prepared and finalised the year-end accounts for 2019-2020 and advised that no changes can or should be made to YE March 2020 financial statements. They have suggested that any changes will have to go through YE 2021, or to submit a P11d for the benefit. When I suggested this (preparing a P11d) on another call to the HMRC they advised this it not the correct procedure and reverted back to submitting a EYU.
So, I'm a little confused with the HMRC advising one thing and the accountants advising another. All I want to ensure is that the employer/employee deduct/pay the correct Tax and NI, one way or another.
I have seen suggestions on posting to the DLA but I would appreciate advice on this as all these transactions took place in 2019-2020.
I feel like I'm going round in circles, so would really appreciated some help,
Thank you
Split payroll year versus financial year.
Sounds like they are the same, but you need to be specific in future.
Is the Director a participator? Is it a one man Ltd/shareholder business or a bigger concern? How many Directors? Are all Directors participators? Why did Director submit expenses for personal travel? Who authorised the expenditure? Who then paid the expenditure? Im trying to get to why the Director thinks it is ok to committ fraud and why the companu seemingly had no check processes in place? You may have to report under MLR.
Has the Director repaid the company for his fraudulent claim? Is he expected to?
You then also say the company does not payroll the expenses, yet you refer to having to sort it through payroll and you mention P11D. Is it a P11D matter? Mixed messages.
So how exactly was the Director paid for these expenses. Did it or did it not go on his payslip for that month?
How much was he paid for his mileage? What rate? Was it a company vehicle? Is he paying anything towards the mileage rate?
Sorry these were for some train fares (and we're not talking a lot of money) - the Director had thought his home was classed as his place of work, and submitted these unknowingly with business travel (other train and taxi fares). These were reimbursed at the time along with the business travel expenses at the actual cost to him. I honestly do not believe that he was trying to commit fraud, I think he was just unaware that his home and the office could both be considered permanent workplaces and travel between them would be ordinary commuting. These were signed off by the office manager, and paid once approved. These were not included on his payslip as they were thought to be a business expense which he was being paid back the actual cost. The HMRC advised that these train fares should be classed as earnings as the company had reimbursed more than the necessary business costs, and calculate Tax and NI due to HMRC, but as these did not go through his payslip I am unsure how to do this.
Would you suggest that the Director reimburse the company for these train fares?
Many thanks for your help, it's much appreciated.
1) Dont ever ask HMRC ANYTHING!!!!!!!!!!!!!!! EVER. If that is ALL you learn today, learn that.
2) Please answer my other questions. Not answering means I cannot give a proper nor correct answer. They are KEY questions. It is aggravating when questions are not answered when someone is trying to help.
Small amount or large amount - he can incur huge fines if he doesnt get it right.
His ignorance of the law is no excuses Im afraid.
It is easy to put right, but we need FACTS
-- Edited by Casu on Sunday 28th of June 2020 05:24:42 PM
Sorry these were for some train fares (and we're not talking a lot of money) - the Director had thought his home was classed as his place of work, and submitted these unknowingly with business travel (other train and taxi fares). These were reimbursed at the time along with the business travel expenses at the actual cost to him. I honestly do not believe that he was trying to commit fraud, I think he was just unaware that his home and the office could both be considered permanent workplaces and travel between them would be ordinary commuting. These were signed off by the office manager, and paid once approved. These were not included on his payslip as they were thought to be a business expense which he was being paid back the actual cost. The HMRC advised that these train fares should be classed as earnings as the company had reimbursed more than the necessary business costs, and calculate Tax and NI due to HMRC, but as these did not go through his payslip I am unsure how to do this. Would you suggest that the Director reimburse the company for these train fares? Many thanks for your help, it's much appreciated.
What sort of business is it?
If he's director what do you mean by "signed off by the office manager".
How long has he worked at that site?
Is it expected to be a normal place of work for more than two years?
What do you mean by reimbursed more than the necessary business cost. I thought that the reimbursement was of the train fare from the receipt?
Initial reading sounds like you were talking to the cleaner at HMRC. As Caron says, never, ever, ever, ever listen to HMRC. They tell you what they would like the regulations to be, not what they actually are.
Also, if ever you do phone HMRC and don't like an answer just phone again and you will get a completely different one from a different person. Not that it carries any weight or gives you any protection anyway.
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
OK lesson learnt, I will avoid asking the HMRC. (I feel like I've had my wrists slapped!).
There are 2 directors and they are both shareholders. This did not involve mileage, just train fares and he wasn't paid via payroll for these payments.
OK lesson learnt, I will avoid asking the HMRC. (I feel like I've had my wrists slapped!).
There are 2 directors and they are both shareholders. This did not involve mileage, just train fares and he wasn't paid via payroll for these payments.
Thank you,
Hi Helen,
just to emphasise these one's are key questions as to whether you can argue that it was not regular commuting. The director didn't make this trip just for the fun of it did he:
What sort of business is it?
If he's director what do you mean by "signed off by the office manager".
How long has he worked at that site?
Is it expected to be a normal place of work for more than two years?
What do you mean by reimbursed more than the necessary business cost. I thought that the reimbursement was of the train fare from the receipt?
But besides this you have already stated that he business has an accountant. If HMRC are disagreeing over whether something is a legitimate expense why are they not dealing with it?
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
OK lesson learnt, I will avoid asking the HMRC. (I feel like I've had my wrists slapped!). Its a key lesson. HMRC skew things in their favour. Their guidance is not the law. Only ever rely on tax law.
There are 2 directors and they are both shareholders. This did not involve mileage, just train fares and he wasn't paid via payroll for these payments.
Thank you,
Hi Helen,
just to emphasise these one's are key questions as to whether you can argue that it was not regular commuting. The director didn't make this trip just for the fun of it did he:
What sort of business is it?
If he's director what do you mean by "signed off by the office manager".
How long has he worked at that site?
Is it expected to be a normal place of work for more than two years?
What do you mean by reimbursed more than the necessary business cost. I thought that the reimbursement was of the train fare from the receipt?
But besides this you have already stated that he business has an accountant. If HMRC are disagreeing over whether something is a legitimate expense why are they not dealing with it? Agree on the information now provided (although still not answered all questions.) Plus then they should guide Helen as to process the bookkeeping entries. You should insist on it, its probably outwith your PII cover so be careful.
The business had two offices, but during last year the office which he attended closed - so he had been working from home and also travelling into the one office, which could now theoretically be classed as his prime location. It is expected that this will be the only business site for the next couple of years. (The business is finance/insurance). He had a number of train receipts which were scanned and loaded onto the computerised expense system - these were reimbursed to him, but I found that there were a few which were from his home to the office, so these may not be classed as a business cost. (Sorry to confuse matters when I stated 'reimbursed more than the necessary business costs' - I meant both the business travel and these private travel costs were paid in one transaction. The HMRC aren't disagreeing with these costs, I was asking for guidance on how these personal expenses should be treated (bookkeeping entry) as I am unsure, so I can go back to the accountants and ask their assistance on this if necessary.
The business had two offices, but during last year the office which he attended closed - so he had been working from home and also travelling into the one office, which could now theoretically be classed as his prime location. It is expected that this will be the only business site for the next couple of years. (The business is finance/insurance). He had a number of train receipts which were scanned and loaded onto the computerised expense system - these were reimbursed to him, but I found that there were a few which were from his home to the office, so these may not be classed as a business cost. (Sorry to confuse matters when I stated 'reimbursed more than the necessary business costs' - I meant both the business travel and these private travel costs were paid in one transaction. The HMRC aren't disagreeing with these costs, I was asking for guidance on how these personal expenses should be treated (bookkeeping entry) as I am unsure, so I can go back to the accountants and ask their assistance on this if necessary.
The business had two offices, but during last year the office which he attended closed - so he had been working from home and also travelling into the one office, which could now theoretically not theorectically be classed as his prime location. It is expected that this will be the only business site for the next couple of years. (The business is finance/insurance). Not contracting, subbing, not IR35 related then He had a number of train receipts which were scanned and loaded onto the computerised expense system - these were reimbursed to him, The company need to review their authorisation process as a matter of urgency. An office manager should not be authorising such if that office manager is not capable of spotting an illegal claim but I found good spot that there were a few which were from his home to the office, so these may must not be classed as a business cost. (Sorry to confuse matters when I stated 'reimbursed more than the necessary business costs' - I meant both the business travel and these private travel costs were paid in one transaction. The HMRC aren't disagreeing with these costs, I was asking for guidance on how these personal expenses should be treated (bookkeeping entry) never ask HMRC for accounting guidance as well as tax. They know even less about acocunting than they do about tax as I am unsure, so I can go back to the accountants and ask their assistance on this if necessary you should, that is what they are getting paid for.
Sorry these were for some train fares (and we're not talking a lot of money)
Hi Helen, welcome to the forum, though it very much feels like you have had a baptism of fire.
Are we talking a material amount here? I'm guessing not so I would simply do a journal in the current years accounts credit travel expenses debit dla - job sorted.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Thanks John, I definitely felt like I failed the initiation test. Thanks for your recommendation, I have spoken with the accountants and as this is an immaterial amount I should take the steps as you suggested above. Thanks again to all for your help.
