If you operate a business and pay yourself or any other individual expenses in relation to employment then you need to be aware of the changes to expense processes that took effect from 6 April 2016.
There are two key areas of change that we want to cover:
Screening and checks
If you pay expenses then you must put in place a system to check that all payments or reimbursements of expenses do not include disallowable items and are not excessive. This system must also check that each expense is ‘allowable’, a defined term.*
This raises two questions: what is allowable and what system do you put in place?
On the former, this was and remains complex and you should seek professional advice if you are unsure whether any particular item is allowable. Our full-service clients will be able to check the treatment of certain expenses with their standard consultant as part of their package.
On the latter, this depends on the scale and size of your business. HMRC provide some examples of checking systems that they would deem adequate here.
However, one key requirement is that the ‘checking’ must be done by someone other than the recipient of the expense. This is a key challenge for small businesses and one that needs to be considered carefully. We can assist where required.
If your small business benefits from an expenses dispensation with HMRC then this will, except in very rare cases, cease to apply from 6 April 2016. If you do have a dispensation in place it is important that you seek professional advice urgently.
The changes go wider than the points we’ve covered above but are broadly speaking tweaks or continuations of existing practice.
If you have any concerns regarding business expenses then please do not hesitate to contact us. We offer a complimentary consultation for all new clients.
* In this context, allowable is defined as "incurred wholly, exclusively and necessarily in the performance of the duties of the employment."