A current HMRC ‘nudge’ letter campaign focuses on the risk that employees misclassify business entertainment as travel and subsistence when submitting their expenses claims. Business entertaining costs are typically non-deductible for VAT and corporation tax purposes, so if this happens and it’s not detected and corrected, errors can arise in the employer’s corporation tax and VAT filings. HMRC are asking businesses to confirm whether their systems and processes for managing these expenses are robust, and to identify any related inaccuracies in their corporation tax and VAT returns.
Source KPMG
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