EIM32725 - Other expenses: flat rate expenses: locally agreed flat rate deductions: retrospection

Section 336 ITEPA 2003

In some cases you may wish to consider whether a locally agreed deduction is appropriate. This may be useful where:

• the employer does not fall within one of the industry groups for which an allowance has been negotiated nationally, or
• there are special local circumstances that cause workers to incur a level of deductible expenditure substantially different from that in the apparently relevant industry in EIM32712.

Such a deduction will only be useful where processing individual expense deductions would otherwise involve considerable unproductive work.

It is important to ensure consistency of treatment across the country, so that employees in similar circumstances receive similar treatment. You must carefully consider what knock-on effects your locally agreed deduction could have for other groups of employees in similar circumstances.

When you fix the amount of any deduction take into account existing nationally agreed amounts for broadly comparable occupations. (This text has been withheld because of exemptions in the Freedom of Information Act 2000)
When you reach a local agreement with an employer for flat rate expenses (FRE) or a fixed rate amount (EXP) that differs from the nationally agreed FRE you must record details of the agreed amounts on the EBS Employer Record in Employer Notes. Enter details in the 'Locally Agreed Expenses' field, using function Amend Employer Notes. It is important that the EBS Employer Notes are kept up to date, as Call Centre staff will refer to them when they deal with FRE requests.

For 2008/09 onwards, EIM32726 gives further guidance regarding the amount of the allowance that you should give.

Retrospection

If an existing flat rate expenses deduction is later reviewed and increased, the new figure will only apply for the current and future years. The new FRE should not be applied retrospectively, or “scaled back” for in date years. That is because employees who spent more than the previous FRE always had the option to obtain relief based on their actual, vouched expenses (see EIM32715).

The “no retrospection” rule may be relaxed in cases where a flat rate expenses allowance is agreed for the first time for a particular group of employees. Offices may then have to deal with requests for expenses for earlier years by employees in that group who have previously had no relief at all. Receipts will rarely be available, though it is clear that some expenses must have been incurred – otherwise, it would not have been possible to agree an FRE deduction for the future. In such a case, it makes administrative sense to use the newly agreed FRE as a starting point in negotiating the relief due for earlier years.