COMPLIANCE
When travel and subsistence goes spectacularly wrong
services firm (Aspire) to advise on the implementation of a salary sacrifice arrangement who, in turn, engaged McGrigors Solicitors to advise on the employment legislation position. TBC considered that implementing a salary sacrifice scheme would put the business on an equal competitive footing with its competitors. At any one time, there were around 1,500 to 2,000 workers participating in the scheme. More than 18 months after the scheme was implemented, TBS engaged a company called BestEx to audit the expenses. But it appears they failed in their auditing role to a large extent to capture all the errors and omissions committed by the claimants of the expenses. In a similar way, the accountants and auditors at the time also failed to spot any inconsistencies as part of their annual audit processes (however, they weren’t engaged to advise on this matter). In addition, the testimony of witnesses for TBC demonstrated that managers and workers alike didn’t have any real understanding of how the scheme worked or indeed why it was important for tax purposes to get it right. What approach did the judiciary take? After a considerable fact-finding exercise, the FTT made some fact-based decisions. It concluded that: 1. Due to the complexity of the scheme, no claimant could have known they were mis- claiming, and no manager been able to fully audit, the records. 2. It would have been impossible for the individual to have received anything but
an overpayment due to the way in which the scheme operated. 3. Basic elements of the scheme were not operated properly. 4. Participants in the scheme were paid using default assumptions unless they notified TBC otherwise on the day of the travel. 5. The lack of knowledge of the expenses system requirements did not mean the claimants were necessarily dishonest – they were simply unaware. 6. The expenses system did not take account of detours made for private purposes in the travel claims.
of those systems was so hit and miss that no proof was available to robustly prove they were not. In terms of the travel payments, they concluded that the public transport payments were made only when a journey was undertaken, albeit a flat raid was paid. The mileage payments were different again, and at Paragraph 138 of the decision, the FTT concludes “it would be inappropriate to conclude that the defects in the system should render all mileage payments made pursuant to that system round sum allowances”. Therefore, TBC will have the assessments adjusted to a lower figure in respect of the payments of mileage which can be demonstrated to be accurate. The FTT also concluded that the subsistence payments and public transport payments had been made outside of the terms of the P11D dispensation and thus, found in favour of HMRC. The Regulation 72 basis of appeal was also quashed by the FTT who found that the appellants had not taken reasonable care and thus, HMRC was correct to refuse an easement. What learnings can be taken from this? The concept of travel and subsistence always seems to be a basic matter. And yet, it’s easy to fall into bear traps giving rise to huge assessments when due care and attention isn’t paid to the detail. Staff training, company and staff policies and inadequate systems all contributed to this case. The client’s eye was on the prize of achieving competitive parity, and the checks and balances fell by the wayside. n
7. The public transport rate was not calculated or paid in accordance with the dispensation.
8. The subsistence was paid automatically whether the participant was entitled to claim it or not. 9. The software calculated journey times without taking into account any change in method of commute to the temporary workplace. 10. The software did not take into account unpaid breaktimes which might have influenced the participant’s entitlement to subsistence allowances on any given day. 11. The audit process was fundamentally flawed. 12. The system did not require the claimants to attach receipts. The FTT considered that this case had to be considered on the facts to establish levels of negligence, human error and causal links. In terms of the subsistence payments, they concluded that they could not be anything other than round sum allowances because the systems and the management
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| Professional in Payroll, Pensions and Reward |
Issue 110 | May 2025
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