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PAYE80014 | PAYE operation: review of claims and deductions: vehicle and mileage allowances (Action Guide)

From HM Revenue & Customs · PAYE Manual

Where a form P810 is received without a form P87 and the expenses claimed are over £1,000 follow steps 1 - 9 below, as appropriate. This Guide is presented as follows,

Note: Where both a form P810 and a form P87 have been received start at step 3.

Steps 1 - 2

Steps 3 - 9

Initial action

1. Write to the customer, enclosing form P87, and request completion of the form. Explain to the customer that the form is needed to support the expenses claim and if we receive no reply the claim will not be allowed

2. Do not amend the code

P87 received

3. If the total net expenses are £2,500 or more

  • Set the case up in SA (or reactivate any dormant SA record) for the year to which the expenses claim relates. Update the record so that an SA return will be issued next April for CY if the claim is for CY. If the claim is for a year earlier than CY, and a return for that year has not already been issued, issue one now

  • If the customer makes a claim for travel and subsistence only, for a year earlier than CY-1 and is still in that employment, then deal with the CY-1 and earlier claims through the PAYE Service

  • Check whether or not you are satisfied with the expenses

In all cases where net expenses claimed less than £2,500

4. If you are satisfied with the expenditure

  • Review CY-1 liability, and

  • If a tax calculation is required, you should include a customer service note ‘P87 claim agreed as’ available from SEES Office Clerical Assistant with the tax calculation that is issued to the customer

  • If a tax calculation is not required, write to the customer and thank them for their co-operation and advise them that no change is required to their figures

  • Code net allowable expenses for CY and CY+1

  • Use note ‘ P87 claim agreed as’ available from the SEES Office Clerical Assistant to record in Contact History agreement of the expenses, and the amount of the expenses

5. If you are not satisfied with the expenditure

  • Ask for the records on which the mileage expenditure was based if, for example

  • The figure for total mileage appears to be an estimate (for example, round numbers, or where it appears that an arbitrary amount has been claimed - 100 per week = 5,200)

  • The mileage travelled appears excessive for the job title

  • You are familiar with the area in which the customer lives and works, consider whether the mileage travelled appears to be nothing more than home to office travel (that is, spread over the year or period of expense, is the mileage approximately the distance between home and place of work?)

6. If upon receipt, the records are obviously estimated ask the customer for details of the journeys actually made to substantiate the expense, if not already provided

7. Upon receipt of the details of the journeys either

  • Follow step 4 above
    Or

  • Recalculate the allowable mileage and rework
    And

  • Write to the customer and advise them

  • Of the revised taxable amount (include an explanation showing how you arrived at the amount) and your intention to issue an informal calculation for CY-1 and to amend the CY coding
    And that

  • These will be issued in 30 days unless you hear from them further. You should also advise the customer that if they disagree, it will be necessary to issue a tax return. HMRC may then consider opening an enquiry into the completed return to challenge the figures disagreed with. If we do that they will be able to appeal against our conclusions and any additional tax that became due

  • Create a paper BF (PAYE105520) for 8 weeks

  • Use note ‘P87 received claim not allowed / revised amount’ from SEES Office Clerical Assistant to record in Contact History details of the revised amount

8. If the customer does not respond by the BF date assume agreement and

  • Issue an informal calculation for CY-1

  • Code net allowable expenses for CY and CY+1

  • Calculate the tax adjustment in favour of HMRC or the customer and record this for inclusion on your monthly LOMR report ‘Claims / Non SA Enquiries’

9. If the customer disagrees

  • Write to customer to explain that a Self Assessment return will be issued as this gives the customer the avenue to appeal

  • Set up the case in ITSA (or reactivate any dormant ITSA record) and issue a return for CY-1

  • Make a note in Contact History ‘Non return - expenses query’ and note action taken

  • Do not amend the code