What are the lessons from the Scottish Civil Service 'expense debacle'?

Government departments or companies should not use the publicity around Scottish Civil Service expense claims as a reason to simply stop using corporate credit cards for everyday business expenses.

Robert Salter said:

“The expense claims which have seen the taxpayer having to pay for nail polish, VIP transport services, yoga lessons and driving test costs amongst other things,  should not be used as a reason to stop using corporate credit cards.”

“Simply removing corporate credit cards, so that they cannot be used for purchasing appropriate work-related items on a timely, efficient basis – and, for example, going back to requiring purchase order authorisations for all purchasers – would be a step back and a real hinderance to many business operations.”

The important lesson from the debacle is for employers to have clear policies and guidelines in place vis-a-vis what these cards can be used for and – perhaps most importantly – a clear system of reviewing and auditing such expense claims, so that employees are required to cover the cost of those expense which are not valid and  there is no clear business purpose.

Firms now wondering whether they have any similar ‘problematic expense claims’ which have been paid historically, should pro-actively look through their claims over the last few tax years, to understand whether they have a problem.

Robert said: “If such a review does indicate that they have been paying for expenses which are not ‘wholly, exclusively & necessarily’ incurred for business reasons – and such costs have not already been picked up from a tax reporting perspective – they then need to consider making a voluntary disclosure to HMRC, to ensure that they meet their tax compliance obligations and are not exposed, for example, in the case of an employment tax audit by the Revenue.”

He added:

“Let us hope that the Scottish Government and employers generally, learn the correct lessons from this case and ensure that they have clear processes and policies for the correct use of corporate credit cards, so that they benefit from the administrative efficiency of these tools, whilst avoiding the tax and compliance risks that their misuse can trigger. Otherwise, employers will either simply ‘bury their head in the sand’ and pretend everything is okay or alternatively ‘throw the baby out with the bath water’ and insist on expensive, slow, and cumbersome Purchase Order Systems being used for even the smallest purchases.”

Would you like to know more?

If you would like to discuss any of the above in more detail, please contact your usual Blick Rothenberg contact, or Robert using the form below.