Travel and Subsistence Update Samantha Davies

| Connect to rsmtenon.com2 Contents Types of Schemes Operating Travel and Subsistence Schemes - Timeline Matters Affecting Compliance Wondering What to Do? Other Considerations

| Connect to rsmtenon.com3 Types of Schemes Operating – Salary Sacrifice Temporary workplace and other business expenses Savings shared by altering relationship between salary sacrifice and expenses payments 11:10 = 50% 12:10 = 2/3 13:10 = 80% Preserve NMW Preserve Lower Earnings Limit for NIC Hybrids and various non-compliant arrangements Build-up method Reduced contractual hours Employer NIC paid by worker Office Holders

| Connect to rsmtenon.com4 Types of Schemes Operating – Pay Day by Pay Day Post Cordant/January Does not involve Salary Sacrifice Automatic tax and NIC relief by ignoring value of employee- incurred expenses in calculations Need independent Expenses Co to charge employee a fee for the service HMRC don’t agree with Barrister interpretation for NIC and won’t grant a dispensation - statements July 11 and August 12 GLA may refuse or revoke license – FS Commercial November 2012 Hybrids and various non-compliant arrangements Holiday pay adjustment Expenses Co only

| Connect to rsmtenon.com5 Travel and Subsistence Schemes - Timeline 1998 Change in tax rules 1998 – improvement for ‘site based workers’ 2008 Consultation on tax relief and overarching contracts 2009 Benchmark Scale Rates for Day Subsistence 2010 Consultation on NMW Regulations and Cordant ‘appeal’ (lost) 2011 (Jan) NMW Regulations altered – expenses not included in NMW 2011 (Jul) HMRC state view that Pay Day by Pay Day Models not compliant 2012 (Jan) Reed Personnel Judgement published (lost) 2012 (Aug) HMRC state dispensations not relevant to Pay Day by Pay Day 2012 (Nov) FS Commercial Judgement in relation to GLA License (lost) Since December 2008 HMRC have made 15 significant amendments to their internal guidance manuals covering the way they deal with dispensations and subsistence expenses.

| Connect to rsmtenon.com6 Matters Affecting Compliance Temporary workplace  Over-arching Contract of Employment  24 Month Rule National Minimum Wage Check Eligible Expenses  Explicit Claims Procedure  Audit Dispensation  Sampling Exercise  Benchmark Day Subsistence  Actual Costs Valid Salary Sacrifice or Effective Pay Method  Clear communication and contract defining entitlement to pay  Employer Expenses Payments don’t count for NMW

| Connect to rsmtenon.com7 Wondering What to Do? Existing Salary Sacrifice Arrangements Bring ‘up to date’ in the context of HMRC views/guidelines Is your contract of employment effective and fully understood? Ensure you have explicit claims for expenses by workers Obtain receipts where they are available – by audit sample at least Consider how pay entitlement is explained – does the worker understand? Are you being fair? New Salary Sacrifice Arrangements Take the right advice Be fair and clear with workers Provide detailed information to HMRC for a dispensation Invest in compliance

| Connect to rsmtenon.com8 Wondering What to Do? Existing Pay Day by Pay Day Models Make sure you understand the risks Have you taken legal advice? Ensure the only point for debate is the key technical principles; i.e. take the steps in relation to contract and expenses stated above The arrangements must be transparent and fair for the worker New Pay Day by Pay Day Models Make sure you understand the risks – they are significant Obtain legal opinion and make sure you discuss and document all relevant facts Implement arrangements that are faultless in their administration including detailed, explicit expense claims Submit forms P11D where any payments are not subject to tax and NIC

| Connect to rsmtenon.com9 Wondering What to Do? Existing and New Umbrella Arrangements (Employed Models) Make sure you and your workers understand the pay entitlement and calculations Ensure that NMW and the Lower Earnings Limit are met Is holiday pay dealt with appropriately? Do workers submit regular claims that match any expenses paid or subject to relief? Check dispensations held (you will need to see the application too) Has the Umbrella company taken appropriate advice? In relation to GLA workers, it is unlawful to use an Umbrella Company that does not have a current GLA license Ensure you have a contract that represents the true agreement between you Have a contingency plan

| Connect to rsmtenon.com10 Other Considerations Real Time Information (RTI) HMRC Construction Industry Scheme Pensions Auto-enrolment Wider tax reviews by HMRC Professional Fee Insurance

Samantha Davies Partner, RSM Tenon