www.horwathcw.
com
Issue 32
October 2009
In this issue:
HM Revenue & Customs
(HMRC) launches fresh attack
on subbies
Fuel benefits – HMRC go
fishing
Advisory fuel rates from
1 July 2009
Day subsistence rates – HMRC
change their policy
Family and friends allowance
National Minimum Wage
(NMW)
Approaching deadlines
HM Revenue & Customs (HMRC) launches fresh
attack on subbies
For many years the Inland Revenue, and latterly HMRC, tried to find ways of getting
the majority of one-man subcontractors in the construction industry out of the
Construction Industry Scheme (CIS) and on to PAYE. The most recent attempt was as
part of the re-vamp of CIS in 2007. This brought in a requirement for main contractors
to verify each subbie’s tax status either online or by phoning a central number at
HMRC. As part of that process, contractors now have to make a declaration that the
subcontractor is not an employee.
Evidently this procedure has not had the desired effect and HMRC are considering
more stringent measures. Their latest proposal is that in future all individual
subcontractors in the construction industry should be automatically deemed to be
PAYE employees unless they can escape under one of three headings:
1) the person provides the plant and equipment needed for the job they have been
engaged to carry out (and not simply small tools)
2) the person provides all materials needed to complete a job
3) the person engages other workers to assist with the job and is responsible for
paying them.
These proposals are contained in a consultation paper entitled ‘False self-employment
in construction’ which instantly tells you where HMRC are coming from! The
consultation started on 20 July 2009 and closes on 12 October 2009. HMRC have
indicated that they will postpone the introduction of any changes until the economy is
stronger.
Fuel benefits – HMRC go fishing
We have become aware of a number of employers receiving letters from HMRC that
ask about fuel benefits. They are being sent to employers who submitted P11D returns
for 2007/08 that reported car benefits but no fuel benefits. The letters come from
different ‘Employer Support Teams’ (a misnomer if ever there was!) but are all
identically worded, which clearly suggests that this is a co-ordinated national
campaign.
The letters set out the rules on fuel benefits and then invite the employer to provide
details of their procedures. The intention is clearly to catch employers out on
technicalities and then hit them with a bill for arrears of tax (grossed up, naturally) and
Class 1A NICs, plus interest and penalties. Employers who don’t respond to the letter
are threatened with a full-scale Employer Compliance Review.
If you have received one of these letters, we strongly recommend that you seek
professional guidance before you reply. If you haven’t received a letter but you report
car benefits on your P11Ds without corresponding fuel benefits, we recommend you
review your fuel procedures to make sure they don’t give rise to a fuel benefit where
none was intended.
 www.horwathcw.com
Issue 32
October 2009 Advisory fuel rates from 1 July 2009
HMRC has revised its advisory fuel rates for company cars to take account of changing
fuel prices. The new rates per mile are effective from 1 July 2009. Details are as follows:

Engine size Petrol Diesel LPG

1400cc or less 10p 10p 7p
1401 to 2000cc 12p 10p 8p
Over 2000cc 18p 13p 12p

Remember that although the rates are termed ‘advisory’, HMRC regard any excess
over these amounts as liable to tax and NICs. Equally, if employees reimburse their
private journeys at lower rates, HMRC may conclude that the employer has paid for
some of the employee’s private fuel and impose a fuel benefit scale charge.

Day subsistence rates – HMRC change their policy

In recent years it has become increasingly difficult for employers to obtain a formal
HMRC dispensation that allows them to pay fixed rate subsistence allowances. HMRC
have been insisting that employers must first carry out an exercise for a month or more
on a representative group of employees to determine what their actual levels of
expenditure are.

HMRC have now softened their stance just a little and have introduced what they call
‘benchmark rates’ that employers can pay. A dispensation is still required – employers
will have to apply using form P11DX – but the requirement for the sampling exercise
has been waived. The allowances and the conditions attached are these:

Allowance Condition
Breakfast rate For irregular early starters only. The employee
– up to £5.00 must leave home earlier than usual and before
6am on a business journey.
One meal rate (five hour rate) The employee must be away from home and his
– up to £5.00 normal workplace for at least five hours. He
must incur the cost of a meal.
Two meal rate (ten hour rate) The employee must be away from home and his
– up to £10.00 normal workplace for at least ten hours. He
must incur the cost of two meals.
Late evening meal rate For irregular late finishers only. The employee
– up to £15.00 must finish work later than usual and after 8pm.
He must incur the cost of a meal that would
normally be taken at home.

An essential qualifying condition for all the allowances is that the employee must be
travelling on a necessary business journey. Employers wishing to pay rates in excess of
the benchmark rates will have to carry out the sampling exercise as before.

Family and friends allowance

Quite a number of existing HMRC dispensations include a fixed rate allowance for
employees who stay overnight with family or friends instead of in a hotel when
travelling on business. The amount most frequently encountered is £25.00. HMRC
have now decided that this relief has no legal basis and no further dispensations of this
kind will be issued. Existing dispensations will be allowed to continue, but relief for this
item will be withdrawn when the dispensation eventually comes up for review.
 www.horwathcw.com
Issue 32
October 2009 National Minimum Wage (NMW)
The rates of NMW and the accommodation offset rates are increasing for pay reference
periods starting on or after 1 October 2009. The new rates will be:

Main rate for workers aged 22 and above £5.80/hour

18-21 year old £4.83/hour

16-17 year old £3.57/hour

Accommodation offset £4.51/day

(maximum of £31.57 per week)

Two other important changes are being introduced at the same time:

ƒ tips, gratuities, service charges and cover charges will not count towards NMW
pay in any circumstances

ƒ two new classes of persons will not qualify for the NMW. These are workers
participating on the European Community Erasmus and Comenius Programmes,
part of the European Union action programme in the field of lifelong learning.

Note too that the government intend to change the age band for the main rate of
NMW to include 21 year olds from October 2010.

Approaching deadlines

Date Action
For further information: 19 October 2009 Pay PAYE deductions, National Insurance Contributions, Student
If you would like any further Loan Deductions and subcontractor deductions for Month six
information on the contents of (unless paying electronically).
this newsletter or any other
employment related issues, Submit paper CIS300 subcontractor returns for Month ten.
contact Tom Elliott or Pay tax and Class 1B NICs in respect of your PAYE Settlement
Steve Livingston:
Agreement for 2008/09.
Horwath Clark Whitehill LLP
22 October 2009 Make electronic payments of Month six deductions.
Arkwright House
Parsonage Gardens Make electronic submission of form CIS300 for Month six.
Manchester M3 2HP
Pay your PSA tax and Class 1B NICs electronically.
Tel: 0161 214 7500
Fax: 0161 214 7501

tom.elliott@horwath.co.uk
steve.livingston@horwath.co.uk

This information is published without responsibility on our part for loss occasioned to any person acting or refraining from acting as a
result of any information published herein. © Horwath Clark Whitehill LLP October 2009