Supporting Guidance: employer compliance: guidance by subject: expenses, benefits and pecuniary liabilities: round sum allowances
The definition of a round sum allowance can be found at EIM05100. PAYE (and Class 1 NIC on the profit element - see NIM05020) applies to such payments.
You should consider that
- it is not uncommon for an employer to view amounts which are really untaxed additional pay as expenses
- the allowance may be genuinely incurred but not be an allowable expense for tax purposes
- the allowance may be excessive
- the allowance should be included in gross pay unless it can be confirmed that it does no more than reimburse an employee for expenses actually incurred.
When you discover round sum payments you should
- frame the initial questions to test whether payments are in respect of genuine expenses or are disguised pay
- test the systems in place which support the payments
- attempt to reach conclusions about the payments during the same visit that the payments come to light
- remember that where an employer is asked to keep records for a set period (which will be reviewed at a later date) the employer may manipulate them.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000) COG904570(This content has been withheld because of exemptions in the Freedom of Information Act 2000)