HMRC COMPLIANCE AUDIT NEW EXPENSE ARRANGEMENTS

[TrueBlueTerrier]

Letter to Branches




No. LTB224/14
Ref: TK/sn/PM
Date: 8th April 2014

CWU TRAVEL AND SUBSISTENCE:

HMRC COMPLIANCE AUDIT NEW EXPENSE ARRANGEMENTS

Dear Colleagues

BACKGROUND

We currently have in place the following scale rate subsistence payments that are claimable by all representatives, at any level within the Union, who find it necessary to claim subsistence from the CWU.

NIGHT SUBSISTENCE

Within London - £95 (£80)

Elsewhere - £90 (£75)

DAY SUBSISTENCE

Less than 4 hours NIL

4-8 hours - £7.50 (£5.50)

8-12 hours - £10 (£7.50)

12-16 hours - £15 (£13.00)

CONFERENCE SUBSISTENCE

50% of the normal subsistence rates.

In June 1999 the union was granted a dispensation by the then Inland Revenue (now HMRC) for the above categories. At that time the amounts shown in brackets above where the rates recorded by HMRC.

HMRC guidelines on expenses allow the rates to increase without the need to notify HMRC provided such increases are in line with RPI. The increases above fall within that category.

HMRC guidelines further state that they (HMRC) will review the dispensation, at four yearly intervals. This means reviews should have taken place in 2003 and 2007.

No contact was received from HMRC until February 2011 at which point they stated they wanted to undertake a compliance audit. The compliance audit covered a number of items and Branches will already be aware of one of the issues i.e. Branch Honoraria and the changes made in that regard.



The audit would also include a review of the dispensation. This should have been the third such review (under their own guidelines) but was in fact the first time HMRC had sought to review this matter since it was granted in 1999. Following a number of exchanges HMRC have agreed, on two separate occasions, to grant an extension to our current dispensation.

Since the current dispensation was granted in 1999 HMRC have changed their rules on the criteria for applying for future dispensations and the conditions to adhere to once such a dispensation is granted in order for it to remain in place.

DISPENSATION

HMRC state that a dispensation can be given where they believe that those covered by it wouldn't have to pay tax on the expenses or benefits provided. Without a dispensation we (CWU) would be required to fill in a P11D tax form for every rep who makes a claim against the CWU no matter how small and how irregular those payments are. We estimate that we would need to fill in tax forms for approximately 3,500 individuals.

From that point on HMRC would include the payments made as income and tax them accordingly, for some, particularly those on various income support type benefits these payments would have to be declared.

Additionally, depending on how much was claimed in any particular tax year, and for some by virtue of the role they undertake within the CWU this is not an insignificant figure, individuals could have their tax code alerted by HMRC who would require individuals to complete a tax return detailing this source of income. It is worth noting that without a dispensation we would be legally required to inform HMRC that all/any reps had received such monies.

To avoid the need for individuals to be subject to this position we are able and indeed HMRC have invited us to apply for a new dispensation before the end of June 2014.

NEW DISPENSATION

The 1999 dispensation contains no reference or instruction of the need for us to provide receipts for any or all of the claims made under that document. However, as stated above, the HMRC rules for applying for and being granted a new dispensation have changed since 1999.

Accordingly, to apply for a new dispensation and to show that we are only reimbursing actually incurred expenditure we are required, on a random sampling basis, to provide receipts to HMRC to justify our new dispensation claim.

HMRC guidelines are clear that the sampling process that we have to undertake has to be random. They have written to us to state specifically that we are not allowed to inform those who we will be picking at random that they are being used for this exercise.

The purpose of this approach from HMRC is to ensure that everyone provides receipts and thus we are then able to satisfy HMRC that we have chosen a representative cross section of those claiming. This will then prove the need for the amounts that we will be seeking the dispensation for.

In other words, to get a dispensation we need to provide evidence to HMRC that the amounts of money we want included in the dispensation are actual amounts of expenditure, actually incurred by those claiming. The reason HMRC insist on this approach is that expense payments, as they refer to them, should not contain any element of profit. They view cash as profit as we would simply be paying cash without showing evidence that the individual claiming actually incurred a necessary additional expense.

Failure by us to achieve a new dispensation, because we have failed to provide the necessary receipts, will result in no dispensation and further will result in the need for us to inform HMRC of all payments made to individuals and it will be for individuals then to discuss the consequences directly with HMRC.

NEXT STEPS

Against this background the NEC debated this matter at their meeting on the 3rd April and agreed the following.

All representatives will be required to provide receipts for all claims for expenses actually incurred from Monday 5th May 2014.

The CWU shall submit a new dispensation order to HMRC in June 2014, The CWU negotiating team will consist of the SDGS, FOS Chairperson, 2 Trustees and representatives from CV.

These discussions will explore all available options to provide alternative solutions which best balance the interests of the Union and maximises choice for the individual.

The new dispensation application shall be on the following basis:
An increase in the current day and night subsistence rates.

Receipts should be provided for expenses actually incurred.

Where receipts are not provided a tax liability will be applied at source for the individual at the higher tax rate.

A process will be put in place to ensure any tax liability is met via CWU HQ centrally where a receipt is not provided.

Representatives who are in receipt of Tax Credits should ensure
receipts are provided to avoid any adverse impact on their tax credit entitlement.

That once the issue has been finalised with HMRC there will be the need to revise the Unions travel and expense policies including the NEC Conditions of Service/Compendium and the Branch Financial Procedures to ensure they are compliant with any position agreed with HMRC and these are presented to the FOS/NEC for agreement.
The NEC will be placing an Emergency Motion to general conference on this matter that will seek to endorse the terms of this LTB.

The importance for the need to provide receipts cannot be overly emphasised. In their letter asking us to apply for a new dispensation HMRC are clear that we should immediately proceed with the sampling required to support a revised application. Adding that they "stress that those included in the sampling must not be made aware of this as the dispensation should be an accurate reflection of what is being spent on allowable costs."

Please also note that in respect of travel claims our current policies remain unchanged i.e. all authorised business travel must be supported by a receipt or where mileage is claimed this must be in accordance with the current HMRC policy.

Once again it cannot be emphasised enough that failure to comply as directed by HMRC could carry a heavy cost for both individuals and the CWU itself given the far ranging powers and fines system open to HMRC to levy.

In simple terms, under no circumstances should we collectively or individually even remotely consider attempting to mislead or fail to cooperate with HMRC on this issue. The consequences of such action by individuals or the organisation collectively would be extremely grave for the CWU and could incur excessive costs.

Clearly the move to a receipted basis for paying expenses is a major change in policy for the CWU. However it is necessary for both the organisation and importantly the thousands of representatives who make claims against the CWU so that no one is adversely affected by tax charges.

The reality is that HMRC only allows certain items to be exempt for individuals from paying tax and these have to evidenced (by receipt) and on an actually incurred basis. HMRC now require CWU to fall into line with their new approach in this area following their review of our dispensation terms under the compliance audit and the NEC having considered this matter have agreed that the course of action outlined in this LTB to be the appropriate course of action for all concerned.

In order to assist Branches to gain a greater understanding of these issues prior to the debate at conference and to raise any questions you may have, two branch briefings will be held.

The briefings will commence at 11.00am and will conclude at 2.30pm.

The briefing for branches within the Midlands, Northern Ireland, North East, North West and Scotland regions will be held in Manchester on Wednesday the 16th April 2014 at;

Pioneer Theatre
Manchester Conference Centre
Sackville St
Manchester
M1 3BB

The briefing for branches within the Eastern, London, South East, South West and Wales and the Marches regions will be held in London on Thursday the 17th April 2014 at;

Lecture Hall
Central Hall
Story's Gate
Westminster
London
SW1 9NH

If any branches have any difficulties attending the briefing organised for your particular region then please contact the SDGS dept and arrangements will be made for you to attend the alternative briefing.

Given the subject matter being discussed at the briefing ideally the branch secretary and branch treasurer/financial secretary should be in attendance.

Any enquiries regarding this letter should be addressed to the Senior Deputy General Secretary Department on telephone number 0208 971 7237 or email address sdgs@cwu.org.

Yours sincerely,

Tony Kearns
Senior Deputy General Secretary

[TrueBlueTerrier]

Letter to Branches





No. LTB287/14
Ref: TK/PM/sn
Date: 2nd May 2014


To:      The Branch Secretary

HMRC COMPLIANCE AUDIT

Following the issue of LTB 224/14, dated 8 April 2014, regarding the above subject this LTB is to update branches on a number of further actions that have subsequently taken place.

Since the publication of LTB 224/14 two National briefings were held in Manchester (16 April 2014) and London (17 April 2014) which were attended by over 100 CWU Branches. At these briefings Tony Kearns, Senior Deputy General Secretary, briefed those in attendance on the background and events that had led to the production of LTB 224/14 and the proposed course of action contained therein. More than 50 questions or contributions were made on this subject at those briefings.

Additionally at the CWU General Conference held in Bournemouth on 26 April 2014, the Senior Deputy General Secretary was given time to brief the delegates on the same points covered at the National briefings. Following this explanation the NEC then moved Emergency Motion E1 that sought to endorse the terms of LTB 224/14.

CWU General Conference unanimously voted in favour of this motion and accordingly the terms of LTB 224/14 will come into effect from Monday 5th May 2014.

For ease of reference a copy of LTB 224/14 is attached for your information.
 
Any enquiries regarding this letter should be addressed to the Senior Deputy General Secretary Department on telephone number 0208 971 7237 or email address sdgs@cwu.org.

Yours sincerely,

Tony Kearns
Senior Deputy General Secretary

[NastyNorman]

This is still ongoing.

Don't expect those at the very top of the union are affected though.

Still have their personal credit cards paid for by the members and their fat salaries.

[TrueBlueTerrier]

25 July 2014
14LTB490 - HMRC Compliance Audit - Request for further information

No. LTB490/14


Ref: TK/sn/PM
Date: 25th July 2014
Dear Colleagues


HMRC COMPLIANCE AUDIT – REQUEST FOR FURTHER INFORMATION


LTB 224/14 outlined the requirement that as from the May 2014 all expense payments made by the CWU would need to be on a receipted basis. The reason for this was that following an extensive HMRC compliance audit we had been given a date (30 June 2014) to submit evidence to HMRC to apply for a new dispensation.


Following the guidelines issued by HMRC we duly applied for a new dispensation by the deadline date supplying, on an anonymous randomly sampled basis, expense claims and receipts as required.


On the 9th July HMRC responded by stating “the application as it stands cannot be approved” They then gave us the option of defaulting to the HMRC published benchmark rates or to exercise a second option that they laid out as follows.


“The union now carry out a full analysis of amounts claimed by all individuals to be covered by a new agreement (i.e. including lay members) in preparation for a meeting with myself and my colleague, Michael Appleby, to take place in early October 2014. At this meeting HMRC would require both evidence (again for example expenses claims and receipts) and analysis work which shows that the requested rates are truly representative of what is actually being spent. The evidence would need to cover a full month's worth of expenses claims for all claimants (unless this proved "impractical" as per EIM05210 and HMRC agreed the basis for a sampling exercise to take place).At the conclusion of this meeting HMRC would then advise whether


a. the evidence and analysis provided is sufficient to support the revised application, or
b. the evidence is lacking but a dispensation for HMRC benchmark scale rates can be provided, or
c. the current dispensation will be revoked as HMRC are not satisfied that the necessary controls are in place to support an agreement going forward


There would be no option for the issue to remain unresolved at that point should this be taken forward.”


We informed HMRC we wished to take up this option but sought a conference call with them in order for them to clarify exactly what it is they want us to supply to them at a meeting in October.


A conference call was held on the morning of Wednesday the 23rd July 2014 following which HMRC emailed to inform us that what they now required was as follows.




1. Gather a full month of expenses claims either received or processed by the union (subject to start date chosen by you - not necessarily 01.08.14)
2. Complete a full analysis of the claims to identify the amounts being spent for each "rate type (eg. over 5 hours)" requested for inclusion in a dispensation agreement
a. So for example if you request an over 5 hour rate, have the analysis available to show what has been spent when such claims have been made during the month reviewed
b. Similarly for any other rates to be requested
3. Have all the data (claims and receipts for example) and analysis work to support the application available for an early October meeting.


Obviously collecting and collating the information now required is not an insubstantial piece of work.


What is abundantly clear from both the extracts above is that HMRC will conclude this matter by early October 2014 so in that regard the matter is now drawing to a conclusion.


CWU will be in receipt of the relevant information for all those who make a claim directly against CWU HQ, so the actions required as a result of this LTB do not apply to those individuals. The actions required apply to all claims either received or processed by Branches.


We have clarified with HMRC that the period they will accept for a “full month” will be for the 4 full weeks week commencing Monday the 4th August 2014 and ending with claims made Sunday the 31st August 2014 inclusive.


Branches will be required to forward to CWU HQ copies of all expense claim forms and associated receipts either received or processed by them during the above period. Branches will understand that we need to be able to present this information to HMRC in a uniform manner that allows them to readily identify the issues we are basing our dispensation claim on. Our failure to do this by the meeting in October will result in HMRC refusing the dispensation and instructing us on how to proceed.


Accordingly to ensure we do not fall foul of the HMRC decision makers in this matter the attached form will need to be used for all claims either received or processed during the dates outlined above.


We have informed HMRC that within the trades union movement August is a month that traditionally sees a high level of holidays being taken and conversely a very low level of meetings taking place. We informed them therefore that it may be that there are not large numbers of claims either processed or received in the period above they understand and accept this point.


To be clear we are not asking branches to change their own processes for paying out expense claims. If claims submitted are paid say, once a fortnight or even once a month then branches should carry on with their normal procedures. Indeed if due to high leave periods claims are not received or processed during the period concerned then again this is fine, branches can only reasonably be expected to send to us what they are physically able to compile.


Notwithstanding that point it is fair to say that this will still create a large amount of work for a small team of staff at CWU HQ for a very short period. In order to assist these staff in collating and preparing this information for HMRC branches are required to collate the claims processed or received during this period on a weekly basis. At the end of the period (31 August 2014) branches should then send all of the information to CWU HQ (finance dept) in one bundle to arrive by no later than Friday the 5th September 2014.


This will ensure staff have sufficient time to collate the information, place it onto our system and then present it in a format acceptable to HMRC in time for the October meeting referred to.


We fully understand the extra work we are asking branches to carry out here but as can be seen from the position taken by HMRC we are now moving towards the end of this matter.


Finally once the meeting has taken place with HMRC in “early October” (their words) then in line with policy agreed at CWU General Conference 2014 further updates will be provided to branches as we move towards compiling full guidance in the form of regulations about how we will operate in the future to ensure we are HMRC compliant as well as comprehensive report on the final outcome.


Any queries on this LTB should in the first instance be forwarded to Tony Kearns Senior Deputy General Secretary via sdgs@cwu.org.


Yours sincerely


Tony Kearns
Senior Deputy General Secretary