PAYE80010 - PAYE operation: review of claims and deductions: expenses / P87

You must review any forms P810 where expenses claimed are over £1000. In all cases where the expenses claimed are over £1000 and the customer has not provided a detailed breakdown of the claim, you will need to issue a form P87.

When reviewing the form P810 and form P87 ensure that

• Each item is claimed only once
• The amounts on the form P87 agree with the amounts on the form P810
• The customer’s arithmetic is correct

One year only claims
Multiple year claims
Initial checks
Round sum allowances
Repayment

One year only claims

Deal with the claim through the PAYE Service if

• The claim is for travel and subsistence only 

• The net expenses claimed are less than £2500

Or 

• The claim is for anything other than or in addition to travel and subsistence

• The gross expenses claimed are less than £2500

Set the case up in Income Tax Self Assessment (ITSA) (see the SA Manual (SAM100221)) (or reactivate any dormant ITSA record) for the year to which the expenses claim relates, if

• The claim is for travel and subsistence only

• The net expenses claimed are £2500 or more

Or

• The claim is for anything other than or in addition to travel and subsistence and the gross expenses claimed are £2500 or more

Update the record so that an ITSA tax return will be issued next April for CY if the claim is for CY and review the code. If the claim is for a year earlier than CY, and a return for that year has not already been issued, issue one now.

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Multiple year claims

Deal with all years through the PAYE Service, if

• The final year claim is for travel and subsistence only 

• Gross total expenses claimed are less than £2500

If the final year claim is for travel and subsistence only or total gross expenses of £2500 or more, then that final year should be put into Income Tax Self Assessment (ITSA) (see the SA Manual (SAM100221)) (or reactivate any dormant ITSA record) for the year to which the expenses claim relates. Update the record so that an ITSA tax return will be issued next April for CY if the claim is for CY and review the code, all earlier years should be worked under PAYE Service.

Forms P87 should continue to be sent through to your Technical Support for those years not assessed under SA for a full review to be made. If any aspect of the claim requires further review the case can either be put into ITSA or dealt with through Schedule 1A.

If the taxpayer makes a claim for CY-2 and is still in that employment, then unless the taxpayer makes it clear the claim is a one off, the taxpayer should be brought into SA for the year.

Further guidance on what to do is provided in the following Action Guides in this section

• PAYE80014 - ‘Vehicle and mileage allowances’
• PAYE80012 - ‘Hotel and meal expenses’
• PAYE80013 - ‘Other expenses’

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Initial checks

It is important that the following initial checks are carried out upon receipt of the form P87

• Is the form P87 signed and dated at section 6 on page 4? If not you should return it to the customer or agent for signature
• Does the claim cover expenses for more than one employer and cover more than one period of employment? If so a separate form P87 is required for each employment and the customer or agent should be asked to resubmit expenses claims again on the basis of a separate form P87 claim for each employment
• Is the information on the form legible and the form completed in the correct format sufficient for the claim to be determined? If any entries are illegible, or the completion of the forms makes it difficult to determine the amounts claimed, send the form back for any figures or clarification to be resolved. Use note ‘P87 returned to taxpayer / agent’ available from SEES Office Clerical Assistant, to record in Contact History that the form has been returned and record details of the further information requested. If the queries can be dealt with better by telephone then you should telephone the customer or agent and record the details in Contact History by using note ‘P87 received further details obtained’ available from SEES Office Clerical Assistant
• Have all the figures in boxes 8, 9, 10, 11, 12 and 13 on pages 2 and 3 been transferred to section 6 on page 4 correctly and is the addition in section 6 then correct? If the error is quite clear then you should correct any incorrect boxes as necessary, if there are any problems you should refer the claim back to the customer or agent for clarification as to why the figures differ

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Round sum allowances

If there has been no reimbursement, consider whether the expenditure was wholly exclusively and necessarily incurred. If you are in any doubt that the claim is correct, ask for the records on which the claim is based, with receipts. Further information is provided in the Employment Income Manual (EIM). The following subjects are of particular relevance

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Repayment

You may need to pursue any information outstanding and necessary for preparing the informal calculation. In this event you should advise the customer or agent what is required to prepare the calculation, and tell them that the expenses claim cannot be fully processed until all this information is submitted.