The end of the line for the expenses gravy train?

Expenses have been centre stage recently, thanks to the seemingly creative antics of some MPs. But it’s not just MPs that get expenses; practices are changing as businesses increasingly try to reduce their overheads and HM Revenue & Customs increases its focus on applying and policing the rules.

Over the years, expenses have often been seen as a way of providing tax free perks to employees. Whilst the rules haven’t changed significantly in recent years, that’s pretty much over now. With fines and penalties for tax avoidance becoming ever more frequent, businesses are better at understanding that expenses paid to employees need to be wholly, exclusively and necessarily incurred in the performance of their duties in order to avoid tax on a real or perceived benefit.

Guy Rigby, director and head of Entrepreneurs at Smith & Williamson, a leading accountancy and financial services group, says: ‘These are tough times. Businesses are looking for less expensive ways of rewarding their employees and many will consider reviewing their expenses policies. There will probably be more home working, fewer company cars, more specific rules on entertaining and expensive business trips and overnight stays. From a tax perspective, the policy needs to be operated within the rules. It’s not worth running the risk of getting it wrong.’

Top tips for reviewing expenses practices include:

• Businesses should have a clear written policy setting out the types and amounts of expenses that can be reclaimed by their staff. Company credit cards are always a recipe for disaster as claims always lag well behind, the event leaving excesses and abuses undetected for long periods.
• A systematic practice of expenses abuse often starts at the top. Once it becomes common knowledge that the boss is claiming generous expenses, employees can rapidly fall into a similar pattern.
• All expenses claimed should always be evidenced by a relevant receipt.
• The provision of cars and car allowances is generally misunderstood. Circumstances will be different from business to business, so take advice to establish the most cost effective way of providing these benefits or reimbursements to your employees.
• Some perks can be provided by way of salary sacrifice. This may mean National Insurance savings for both the business and the employee.
• Income Tax abuse is not the only issue with expenses. There are also VAT issues which will arise on claims made without proper VAT receipts.
• Remember that “entertaining” cannot be claimed as a tax deduction for business purposes, and that VAT cannot be reclaimed.

Colin Mills CEO of The FD Centre www.thefdcentre.co.uk who are the leading provider of experienced Finance Directors to mid-sized businesses on a part time basis, comments – ‘With the prospect of higher rate taxes and the government’s need to fill the gap created by the bank sector bailout, there will be more focus on compliance. Expenses are a natural target, so businesses should read the rules at  www.hmrc.gov.uk or talk to their professional advisers.’

The FD Centre and Smith & Williamson have recently announced that they are working in alliance to provide financial expertise to entrepreneurs and growth businesses.  Both firms have similar philosophies and approaches to providing high quality services to growing businesses and SMEs. 

For more information contact
Guy Rigby, Head of Entrepreneurs at Smith & Williamson
020 7131 8213
guy.rigby@smith.williamson.co.uk

or
Colin Mills
0870 011 1499
colin.mills@thefdcentre.co.uk

PR enquiries to
Jess Koslow, PR executive at Smith & Williamson
020 7131 4264

or
Andrew Forster, Marketing consultant for the FD Centre
andrew.forster@thefdcentre.co.uk
0870 011 1499

About Smith & Williamson
Smith & Williamson is a leading firm of accountants and business advisers. The entrepreneurial and growth business sector is one of its key areas of focus and clients include both private and quoted companies, ranging from early stage to mature businesses with values of tens and hundreds of millions.  

In addition to accountancy services, the firm offers an unusually broad range of expertise including tax, investment management, private banking and financial advisory services. It operates from offices in London, Belfast, Birmingham, Bristol, Dublin, Glasgow, Guildford, Maidstone, North London, Salisbury, Southampton and Worcester. Nexia Smith & Williamson is the audit practice of Smith & Williamson and is an independent company.

Smith & Williamson Limited Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International.

Nexia Smith & Williamson Audit Limited Registered to carry on audit work and regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International.

About the FD Centre
The FD Centre is the biggest, longest established and fastest growing provider of part-time Financial Directors.  With a team of over 120 in 16 regional offices, the FD Centre is committed to helping businesses maximise profits, realise their goals, work through complex financial situations and offer support for, or even take away completely, the running of everyday financial management.

Every one of our Financial Directors is used to “getting their hands dirty” and has live experience working as an FD with specific knowledge of core sectors such as retail, professional services, technology, media, telecoms, services, manufacturing, distribution, travel and leisure, recruitment, FMCG, charities and many more.  Our FD's are not just number crunchers; they work hand in hand with our clients on finance issues and wider strategic activity.