Compliance Check

jennifernil

ioscorpio wrote: »

If I do that, when I enter the Allowable Expense inc the mileage paid amount deducted, you are still overpaying on tax as I entered the same fig as my employer for tax deducted.

I have written a letter that I will send tomorrow, so will have to wait and see what they come back with.

But you haven't been paid any "expenses" as such, you received additional income which was fully taxed. It really doesn't matter what it was for.

You are allowed to receive the 40/25ppm tax free, so you need to claim relief on the full amount.

ioscorpio

But I am being paid "Travelling Expenses" as stated in my contract, as in Post 5. If I travel 100 miles in a day, on my timesheet I declare 100 - 20 and am paid 80. Then I claim 40p tax relief on the 20 miles and on the remainder the difference between 28p and 40p. On my payslip it is separated as Mileage. If I travelled a 1000 miles in a month and worked 20 days, I would be paid 600 miles 1,000 - 20 x 20 = 600.

jennifernil

Yes, but you have not received it tax free, so you should not deduct the amount you were paid from your claim for relief on the full amount.

If your employer had paid it tax free, then you would have to deduct the tax free amount you had already received.

ioscorpio

I see where you are coming from, but if the taxman asked my employer if they paid me any mileage they would say yes. I faxed and posted my letter today to make sure that they get it, so will have to wait and see how they respond.

jennifernil

But then they would also have to say that they deducted tax from it. Tax that you are entitled to reclaim.

It is only the tax relief on what HMRC allow to be paid tax free that you are trying to claim. It's not as if you are trying to cheat anyone or ask your employer for more money!

ioscorpio

I have received a reply from the tax office today, they state my tax return should have shown my pay and tax from my P60 and I should have claimed the total expenses incurred on my tax return. Relief is not due for journeys from home to my place of work. I do not have a permanent place of work, but all my journeys start from home. They want a mileage log, I have already provided a monthly mileage log but not a daily mileage log.

Taken from HMRC

http://www.hmrc.gov.uk/paye/exb/a-z/m/mileage-expenses.htm



Only two types of journey count as business travel:

• journeys that form part of an employee's employment duties (such as journeys between clients' premises by a salesperson)
• journeys that relate to an employee's attendance at a temporary workplace

jimmo

Sorry to do this but speaking as a former taxman I get the feeling that HMRC are still at the fact finding stage of their Enquiry (sorry- compliance check) and you may be in for a rough time.

The details you have posted are far from sufficient for a definitive answer to be given but my feeling is that you have missed the significance of antrobus’ referral to an overarching contract.

If, as seems to be the case, you do not have an overarching contract your allowable travelling expenses will be governed by the special rules for agency workers. Under those rules each assignment you receive from your agency is effectively a new job having its own normal place of employment.

In other words if on Monday you take an agency assignment to client A and on Tuesday you take an assignment to client B then on Monday your journey from home to client A is normal commuting as if you were an employee of client A and not allowable for tax purposes but on Tuesday your journey from home to client B is normal commuting as if you were an employee of client B and not allowable for tax purposes.

http://www.hmrc.gov.uk/manuals/eimanual/EIM32130.htm

To me, the fact that your agency has started taxing payments which were labelled as expenses speaks volumes. Did they not explain?

ioscorpio

jimmo
My employer has not just started deducting tax, they always have. My previous employer, which was another agency in the same industry with me doing the same job, did not deduct tax from mileage payments.

People who are employed directly by the developer can claim their mileage as long as they do not work on a site for more than 24 months. So surely for myself it it a temporary workplace?

Why would one agency deduct tax and another not?

In other jobs in the past in different industries, I have not been taxed on mileage when I have travelled from home every day.

jimmo

ioscorpio wrote: »

Why would one agency deduct tax and another not?

A good question but we are not going to find the answer in a couple of posts on a forum.

A simple answer could be that the agency which paid your travelling expenses tax free ( call that Agency 1) did actually use an overarching contract and your current agency (Agency 2) do not use overarching contracts.

If that is not the reason and, all things being equal, the most likely explanation is that one of the agencies is getting it wrong.

I can understand if you are inclined to believe that Agency 1 was doing it right because that seems to be the better result in your pocket but you can be pretty certain that HMRC will be inclined to believe that Agency 2 are doing it right.

Turning back to your original question it seems to me that you have put yourself in the firing line by declaring a different gross income to that declared by your current agency. That, I am afraid, was a fundamental error triggering the Compliance Check and you now have to deal with that.

Your travelling expenses are, well and truly, going to come in for scrutiny and you will need to deal with that from first principles. Are they allowable or not?

On a practical note you need to consider whether it is worth paying an accountant to argue your case for you, spend hours and hours of your own time researching and arguing with HMRC yourself or taking the hit that HMRC seem very likely to impose.

The one thing I would urge you not to do is to tell HMRC that Agency 1 paid your expenses tax free.

If you do that HMRC will continue to deal with the Compliance Check on first principles but also see an opportunity to reopen earlier years and attack what happened when you worked for Agency 1.

ioscorpio

jimmo

Too late, in my letter to HMRC I stated that I did not pay tax and NI on mileage with agency 1.

I agree, I need them to determine if I am attending a temporary workplace. Having looked at their website, it is very confusing.

[FONT=&quot]EIM32011 - Travel expenses: travel for necessary attendance: introduction: simple examples[/FONT]
[FONT=&quot]Example 5[/FONT]
[FONT=&quot]An installation engineer works at the premises of his employer's various clients throughout the UK. He has no permanent workplace and attends each temporary workplace for a short period only. One week he travels from home in Dover to a temporary workplace in Gloucester and stays in a hotel for 4 nights before returning home. His journey costs £130 and his subsistence (accommodation and meals) costs £300. He can deduct the full cost of £430.[/FONT]

[FONT=&quot][/FONT]
[FONT=&quot]The only difference is I return home on a daily basis and do not stay away overnight.[/FONT]

[FONT=&quot][/FONT]
[FONT=&quot]I don't want a long drawn out battle with them, so don't know whether to give call to speak to them, to determine are they allowable or not, rather than complete a mileage log to then be told they are not allowable.
[/FONT]