Dispensations and benefits in kind

A dispensation removes the requirement to return to HMRC on P11d forms expense payments which are not taxable. If no dispensation exists the employee then has to submit a claim that the expenses reimbursed were incurred solely in relation to the business, and are therefore not taxable.
In short a dispensation can save work for the employer, the employees and HMRC.

For example the provision of business travel for an employee is often included in a dispensation. Items covered by a dispensation do not have to be returned on the annual P11D form.(Payments for the use of a company car or van are not included here as they are covered by separate rules.)

For some businesses this could take some of the pain out of this annual chore.

HMRC require that you need to have the following systems in place to qualify you for a dispensation, they are:

You must have an independent system in place for checking and authorising expenses claims. At a minimum, this means having someone other than the employee claiming the expenses check that:

* the amount claimed isn’t excessive
* the claim doesn’t include disallowable items

If it is not possible for you to operate an independent system for checking and authorising expenses claims, for example, because you are the sole director of your company and you have no other employees, you will only be able to obtain a dispensation if you:

* ensure all expenses claims are supported by receipts for the expenditure
* demonstrate that the claim relates to expenditure that can be covered by a dispensation, your receipts may be sufficient for this purpose, but if not you must retain additional information.

Once a dispensation is granted it will last indefinitely although HMRC may review from time to time to make sure the conditions under which the original grant was made still apply.

Generally speaking dispensations are granted from the application date. However HMRC may agree to apply the dispensation from the beginning of the tax year in which you apply. It’s not too late to apply for 2008-09, call if you would like assistance to do this.

Long service awards

Any salaried employee of a business can be paid a long service award. The way in which the award is given can radically influence the tax treatment!

All cash awards are taxable. They will be treated as part of your remuneration and subject to deduction of tax and National Insurance. Cash awards include:

* a payment including a cheque (This also rules out National Savings Certificates, premium bonds and so on.)
* a cash voucher
* a credit token
* shares other than those issued by the company employing the person who receives the award
* an interest or rights over securities or shares

Non cash awards are tax free if certain conditions are met. The conditions are:

1. The award must be made to mark a period of not less than 20 years service with the same employer.
2. It must not be a cash payment.
3. The taxable value of the award must not be more than £50 for each completed year of service.

For most employees the amount of the award is determined as the cost to the employer. For lower paid employees it is the second hand value of the award.

If the award exceeds the £50 for each year of service limit, only the excess is taxable.

If an employer makes multiple awards to the same individual, say after 20 years and then again after 30 years; each award qualifies as a separate award – this further concession does not apply unless there is a gap of at least 10 years between the awards.

If you have clocked up 20 years service you could receive goods to the value of £1,000 and pay no tax or National Insurance – that buys a lot of golf equipment!

Backdated claims for VAT refunds

You may have in the past overpaid VAT output tax or underclaimed VAT input tax, and this might date back many years. Now is the time to claim the overpayment back from H M Revenue & Customs.

– Claims can be back dated to April 1973, or the date of your VAT registration if later.
– But the deadline for submitting a claim is the end of this month, 31 March 2009.

It is possible to base a claim on a reasonable and valid estimate if the underlying records no longer exist. Claims can include a request for interest.

The following list includes items for a possible claim:

* Mileage costs paid to employees
* Staff expenses
* Subsistence
* Recovery of VAT on imports

If you are at all unsure about VAT that has been added to particular supplies you have made, or whether VAT should have been recovered on certain costs, please call.

Record keeping

Following changes to the law, H M Revenue & Customs now have much stronger powers to require that you provide evidence to back up entries on your tax returns. For business owners this means your accounting records and supporting documentation need to be of very good quality.

If HMRC can demonstrate that your records are less than effective you will face penalties.

The legislation requires you to:

“keep all such records as may be requisite for the purpose of enabling him (you) to make and deliver a correct and complete return for the year or period.”

In future you will need to keep a careful eye, not only on the results generated by your accounting software, but also on the completeness of the underlying records. It may well be the case that we offer you advice to improve the way you process and maintain records.

Records include supporting documentation such as, accounts, books, deeds, contracts, vouchers and receipts.

We are now delighted to offer all clients an easy to use online accounting system. We have held off from doing this for a long time, in an effort to ensure that the solution we offer is the best. That means easy to use, and useful information graphs, and reports at your fingertips.

If you would like us to review your accounting systems and record keeping prior to the tax year end please give us a call.