Conference rocks::uk_digital

1404.0. "UK Tax Form filling in (and taxman victimisation)" by QUICHE::PITT (Alph a ha is better than no VAX!) Mon Feb 24 1997 11:10

I have just received a very very nasty letter from the taxman about my tax
affairs for the tax year 1995/1996, saying "it has been noticed that you
received a substantial amount of travelling and subsistence from your employer. 
Can you please explain briefly why this was paid and I invite you to make a
Section 198 claim for these expenses."

Leaving aside the tax office jargon about Section 198 that was not explained
anywhere, this letter upset me, arriving as it did on a Saturday morning, so
that I could do nothing about it for two days.

This morning I have spoken to the tax office, and eventually got an explanation.
 I'm writing this note in the hopes that I can spare some of you the worry.

On the 95/96 Tax Return, there is a box labelled "Expenses for which you wish to
claim a deduction List here the types of expenses and give the amounts."  I
struck out this box, on the basis that at the head of the section it says "You
can leave out altogether in this item (and the next item) all amounts where the
Inland Revenue had agreed with your employer that the expenses paid to you are
allowable and no tax will be payable.  (This is known as a dispensation.)"

This is the wrong thing to do!

There is NO agreement between Digital and the Inland Revenue about expenses, so
the taxman told me this morning.  A dispensation is all to do with the taxman
agreeing that if you work in a certain profession you are allowed �x for
work-related clothing, or tools, or whatever.  There is no dispensation for the
computer industry, at least not in general.

So, what should I have done?

Well, the answer is very very simple.  Instead of striking out that box, I
should have written "As per P11D" in it, and I wouldn't now be getting the
hassle.

I did ask the taxman why he was victimising me, and he said he wasn't!  Of
course!  However, it transpires that they now have better computer systems
(damned computers!) to detect tax evasion - he didn't like my words, but sort of
agreed with me on this!!!  It seems now that the computer looks for "Nothing in
the box about deductable expenses" and "over �x in travelling and subsistence on
the P11D".  As for what �x is, I don't know, but about �4,500 was above it.

So, you have been warned.  Don't leave that box blank on your tax return.

Of course, 1996/97 is totally different anyway, since we're now on
self-assessment, but I'm sure there will be an equivalent place on some form or
other ...

T

There is a standard pro-forma letter that you can include with your tax return
or send to your tax office in any case (not that have been invited to send one).

All you need to do is get a copy of your P11D (that Digital is bound to provide
to you) and copy the same numbers to the Section 198 letter.

As all contractors at least are aware (those that operate as Ltd. status), all
Directors and employees earning over �8,500 pa have to provide a P11D from the
"company" and the individual's tax return is sent in with a Section 198 letter
containing a copy of the P11D information - when the two "sources" of
information match at the tax office, no problem, otherwise you have recieved
benefits in kind which are taxable (and there may also be National Insurance due
too !).

As far as I'm aware, Digital ONLY pays expenses which are wholly incurred as
part of your duties as an employee.

Chris