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Government review may lead to radical changes in travel and subsistence payments

Government review may lead to radical changes in travel and subsistence payments

A proposal to abolish tax allowances on travel and subsistence expenses could be revived by the government’s current consultation into expenses tax reliefs believes Alphabet.  

Last month HM Revenue and Customs’ (HMRC) announced it was consulting on the future viability of flat rate employee expenses, such as Approved Mileage Allowance Payments (AMAPs), and whether they remained appropriate (Newsfeed: 7 April, 2017). The consultation runs until 12 June.

Meanwhile, three years ago the Office of Tax Simplification (OTS) recommended a formal, comprehensive study on what it called ‘the possible radical idea’ of travel and subsistence expenses being allowable only if reimbursed by the employer. While the study has not taken place, the proposal remains on the table.  

Clive Buhagiar, head of pricing and planning at the business mobility company, said: “From HMRC’s perspective, this would eliminate a huge number of claims for tax relief on expense costs that either weren’t reimbursed by employers or which were reimbursed at less than the relevant Advisory Fuel Rates (AFR) or AMAP rate.”  

The current review of expenses tax reliefs is partly designed to help HM Treasury understand why tax relief claims rose by 25% to £800 million per year between 2010 and 2015.  

Reflecting on the government’s recent changes to car salary sacrifice and cash or car allowance rules, which came into effect on 6 April and our contained in the 2017 Finance Bill, Mr Buhagiar said: “The ongoing confusion around the implications of the Finance Bill is driving many businesses to consider offering cash alternatives to company cars, which would only further exacerbate the expenses issue highlighted by the government. Changes resulting from the consultation could have major impacts on fleet, travel and subsistence policies, especially if the OTS’s recommendation is taken up.” 

From a fleet perspective, all drivers would then want to be reimbursed for fuel and mileage at the full-scale rates since they could no longer claim tax relief if paid less. It would also entail more administration for businesses because employees would take care to put every scrap of travel costs through the expenses process, knowing that they would not be able to claim tax relief on non-reimbursed costs at the end of the tax year.  

“Fortunately, new technologies and working practices are already coming into play in this area. Mobility solutions, such as Corporate Carsharing and flexible rental offer the prospect of near-seamless alternatives to pool cars, taxis and public transport with little or no need for employees to reach into their own pockets for travel,” added Mr Buhagiar.  

Alphabet is urging fleets to make their voice heard by responding to the consultation. Mr Buhagiar also recommends, before making submissions, that fleet decision makers review the OTS’s 2014 report on employee expenses and benefits. It is available at http://www.gov.uk/government/organisations/office-of-tax-simplification.

Further recommendations by the OTS include lifting the requirement for employers to retain receipts for scale charge expense claims, and that tax reliefs for travel and subsistence should be reviewed formally every 10 years to make sure the system keeps up with changing work patterns.  

Mr Buhagiar said: “While the current HM Treasury consultation deals with the last of these recommendations, the document makes no specific mention of waiving the requirement for receipts or of making radical changes to travel and subsistence allowances. However, it does encourage respondents to feel free to submit broad evidence and fresh ideas, so businesses may like to address issues raised by the OTS in their submissions.”  

The current consultation questionnaire is accessible on the government website at www.gov.uk/government/consultations/taxation-of-employee-expenses-call-for-evidence.