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HMRC internal manual

PAYE Manual

PAYE operation: review of claims and deductions: hotel and meal expenses (Action Guide)

Where a form P810 is received without a form P87 and the expenses claimed are over £1,000 follow steps 1 - 10 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 - 10

Further guidance on expenses and on what information can be accepted over the telephone is available at PAYE79015.

Initial action

1. Write to the customer, enclosing form P87, and request completion of the form. Explain that the form is needed to support the expenses claim and if we receive no reply then 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 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 return will be issued next April for CY if the claim is CY and review the code. 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 | |   | ### In all cases where net expenses claimed less than £2,500 | | 4. | Check whether or not you are satisfied with the expenses | | 5. | 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 ‘expenses claim agreed’ with the tax calculation that is issued to the customer, to thank them for their co-operation, and to advise them that the expenses have been agreed and included in the calculation in accordance with the figures given | |   | * 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 SEES Office Clerical Assistant to record in Contact History agreement of the expenses, and the amount of the expenses | | 6. | If you are not satisfied with the expenditure | |   | * 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 | | 7. | If the records are obviously estimated, if not already supplied, ask for the receipts where retained, to substantiate the deduction | | 8. | Upon receipt of details either | |   | * Follow step 3 above
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 that 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 tax return to challenge the figures disagreed with. If we do that the customer 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’ to record in Contact History details of the revised amount | | 9. | 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’ | | 10. | If the customer disagrees | |   | * Write to the customer to explain that a Self Assessment return will be issued as this gives him or her the avenue to appeal | |   | * Set up the case in ITSA (or reactivate any dormant ITSA record) and issue a tax return for CY-1 | |   | * Make a note in Contact History ‘Non return - expenses query’ and note action taken | |   | * Do not amend the code |