Overnight allowances: RHA ramps up pressure on HMRC

The Road Haulage Association (RHA) met last week for the second time in a fortnight with officials from HM Revenue & Customs (HMRC), in a bid to clarify the situation around bespoke overnight allowances for lorry drivers.

As a result, the RHA today reports that HMRC is again redrafting guidance as to what it requires of employers and drivers, following requests for greater clarity from the association.

“It is agreed that while evidence – mostly receipts – of costs incurred is required, it is no longer required to be roughly averaging £26,” added the RHA.

The meetings were scheduled amidst what the RHA called “wildly variable and contradictory” messages from the tax authority on the subject, which it said had left the industry “bewildered”.

The association previously said it was “making the case for a complete rethink” of HMRC’s “fundamentally flawed” new system for overnight allowances, which involves the checking of driver receipts, in order to establish a practical solution that would be acceptable to the industry.

Earlier in July, the association responded to a Treasury consultation on the taxation of employee expenses, in which it severely criticised the HMRC’s approach to the issue.

“Around 10,000 lorries are required to stay away from base overnight, with the driver sleeping in the cab,” said the RHA in its response document.

“The RHA had an agreement in place for 26 years which recognised the unique circumstance of drivers overnighting in their cab, was understood throughout the sector, and worked well.

“The burden on employers, which was entirely reasonable and fully understood, was to be able to demonstrate that on all occasions the allowance was correctly claimed – that the driver was away in a subsistence position.

“The allowance is currently set at a maximum of £26.20.

“HMRC made clear that it was unhappy with the position that checks of receipts were not being required. It unilaterally imposed this requirement on the industry with effect from April 2017, against the advice of the RHA. Our detailed arguments as to why it would not work were not addressed…

“It is clear that the new bespoke allowance system, which requires some form of checking, is fundamentally flawed, cannot work as implemented and is unlikely ever to work satisfactorily.

“HMRC was unprepared for the change itself and its messaging to the industry has been wildly variable and contradictory.

“This has damaged the industry, greatly increased the administrative burden on both business and HMRC (through increased use of [the P87 form for expenses tax relief] by drivers) and left the industry bewildered as to what is required of it.”

HMRC had been unable to clarify what employers needed to do in order to comply with its rules and avoid claims for back-tax and penalties after an inspection, the RHA said.

“This is critically true with regard to the evidence required from the driver. How much does he have to show he has spent? HMRC remains reluctant or unable to state a figure or give comparable clarity,” the association said earlier in the month.

“HMRC appears to have moved from its position that it has to roughly equate to the allowance but is reluctant or unwilling at this stage to say where it has moved to.”

The RHA is advocating that the industry should revert to a similar system to that which existed before, but with a new requirement for the driver to state that he had incurred expense.

It proposes that the limit remain at £26.20 for the present.

“This would be extended to workers spending nights abroad, where HMRC states that the rules need to be changed.”

The association said it believed its solution was possible within current legislation.

“HMRC has already moved from its long-held insistence that the law now requires employers to check receipts – which the RHA long contested – to include the possibility of photographic evidence [for example, of a meal for which expenses were claimed].

“This is something of a red herring in terms of the basic point, but establishes the principle that receipts are not the only possible evidence and opens the way for the RHA’s solution.

“Ultimately, if HMRC insists in enforcing its interpretation, the difference in view between the RHA and HMRC can only be settled before the Tax Tribunal. Meanwhile, the industry is left in a position of uncertainty, and at risk of HMRC enforcement action.”

The association said that HMRC’s system had been devised “without regard to practicality or proportionality”.

“At our recent meeting with officials, it was put to us that a driver away in his cab for five nights in a week gets circa £125 – no small sum.

“To that, we would respond that it is no small thing for a worker to be away in his or her cab for five nights in a week, that the incurring of expense is unavoidable, and that the allowance is much the same as the cost that a typical worker in any other job would incur when away for one night.”