TECHNOLOGY INSIGHT
Adam Reynolds, chief executive officer of webexpenses, explains why digital expenses management systems are important Is your business ready for a HMRC inspection?
R eceiving a visit from a team of that can make even the most battle- hardened of payroll professionals feel slightly queasy. It may take the form of a routine tax audit or it may be an investigation resulting from something that has triggered suspicion about your company’s tax returns. Either way, it’s an unsettling time for any organisation, with the risk of back- payments and fines for any tax compliance breaches they find. If it’s a serious breach, it could even lead to a prosecution. No matter how scrupulous you have been, there’s always that fear about what may be uncovered as auditors forensically pick through your paperwork. And one area they will pay particular attention to, is the way your organisation handles employee expenses. It’s a complex area and one where compliance is often more about interpretation than a binary right or wrong. This is why it’s important to keep in mind that the inspectors are looking at the macro as well as the micro of your expenses regime. They will take an overview of the end-to-end process that you have in place to manage employee expenses. They want to see evidence that you have an enforceable expenses policy, an effective approvals process, a robust system of checks and balances and fastidious record keeping. This is why digital expenses HM Revenue & Customs (HMRC) inspectors is one of those events
management systems are such an invaluable asset when it comes to handling a tax inspection. When used effectively, they can provide everything an organisation needs to tick all of the HMRC boxes. Rather than an expenses policy being a static document at which employees may occasionally glance, a digital system allows it to become an active part of their workflow. ...can minimise the risks an organisation is exposed to during an investigation... The systems provide employees with automatic policy notifications and confirmation checks as they’re going through the process of making a claim. They can also check, in real-time, if the claim is within policy or if it breaches any pre-defined limit. If it does, the claim can be rejected or it can trigger an alert for further investigation. But it doesn’t matter how compliant or effective your expenses regime is, if you don’t have the accurate documentation to prove it to the auditors. This is a key benefit of using digital expenses management. It not only records every aspect of a claim – i.e. the who, why, what, where and when – but also each stage of the approval process. It provides evidence that
each claim has been through the correct procedures. The accurate data that’s generated is particularly effective at removing some of the typical trouble spots during an inspection, namely business mileage and petty cash. Instead of relying on employee ‘guesstimates’ for mileage, a digital system uses a smartphone app to track the exact route and distance via global positioning system technology. And while much of the petty cash process was previously undocumented, a digital system allows it to be integrated into the main expenses system – providing the same level of monitoring, checks and record keeping. All of this information helps to provide proof that your business has taken all reasonable steps to ensure that expenses are legitimate and compliant. A digital system can minimise the risks an organisation is exposed to during an investigation but it should not lead to complacency. Just like any tool, it’s only effective if it’s used properly. An organisation with poor documentation and little way of showing what checks were made is liable to attract significantly more suspicion than a company which can produce rigorous records. So, rather than removing the fear of an inspection, a digital expenses management system can be thought of as a way to positively channel that trepidation. It can ensure that next time the Inspectors arrive, the experience is no more fraught than it needs to be. n
| Professional in Payroll, Pensions and Reward | February 2017 | Issue 27 44
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