PAYE80013 - PAYE operation: review of claims and deductions: other expenses (Action Guide)

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.

Initial action

Steps 1 - 2

P87 received

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 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 expenses are £2,500 or more

  • Set the case up in Income Tax Self Assessment (ITSA) or reactivate any dormant ITSA record for the year to which the expenses claim relates. Update the record so that an ITSA tax return will be issued next April for CY if the claim is 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 has made a claim for a year earlier than CY-1 and is still in that employment, then unless they make it clear the claim is a one off, they should be brought into SA for that year and subsequent years
  • If the claim is a one off, check whether or not you are satisfied with the expenses

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

4. If you are satisfied with the expenditure

  • Review CY-1 liability
  • If a tax calculation is required, you should include a customer service note ‘P87 claim agreed as’ available from the 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
  • Amend the CY / CY+1 codes
  • 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 claimed

  • Ask for the records upon which the deduction was based, if for example
  • Obvious estimates are included (for example rounded figures)
  • The difference between the total amount of the deduction and the amount reimbursed is more than £300
  • The type of expense does not appear reasonable for the job description
    Also consider
  • Is any fee or professional subscription also included separately on form P810 (a double claim)
  • On the form P87 - if there is no entry in box 9 should there be something in box 10. Check P11D information for disbursements
  • Consider if the expenses are wholly, necessarily or exclusively for the purpose of that employment (other than travelling)

6. If upon receipt, the figures are obviously estimated

  • Ask for the receipts where retained, if not already provided, to substantiate the deduction

7. Upon receipt of details either

  • Follow step 3
     Or
  • Recalculate the allowable expenses 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 claim not allowed / revised amount’ 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
  • Amend the CY / CY+1 codes
  • Calculate the tax adjustment in favour of HMRC or the customer and record this for inclusion on the 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