Managers Expenses and Audits

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spankypat

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Hi all, not sure if this is to correct are to post but here goes anyway. i have a question and its a two parter if knowlegeable people could clear somethings up i would be grateful.
the MD in the organisation i work claims a lot of expenses (im talking 5000 grand a month nearly 60 grand for the year so far) as well as a pretty huge salary and im wondering about the tax implications. it is paid out in cheque so i wondering is it up to her to declare it to revenue and pay tax or would it go through as part of her salary. she is not an s1 director just very cushy with the owners wife.

2nd part. regarding an external auditor coming in are they looking through the expenses going she shouldnt have claimed for that or do they just certify that yes she got paid and not concern whether the expense ie was legitimate. ie she puts a tradesmans work and materials bill on her home as part of her expenses for work.

i probably havent worded it great but im sure people have a general idea what i am talking about.

reason for post is this person is still claiming loads and giving freebies to friends after laying off staff and cutting hours
 
The general Revenue guidelines on expenses are in several Revenue leaflets [broken link removed] for subsistence and and [broken link removed]for motoring etc.

Any amounts paid in excess of these must have Revenue approval. Any expenses must be wholly exclusively and necessarily for the employment. Any non-standard ones, (e.g. employee gets some stationery etc. while in town and is reimbursed for it), then those should be backed up too by relevant receipts.

The external auditors should be concerned with ensuring compliance with Revenue rules on expenses. Blanket amounts paid with no back up are likely to create trouble on a Revenue Audit of the company's affairs.
 
the thing is with the expenses that there is receipts but they would generally have nothing to do with the company. charge on a credit card for a lamp or piece of art but no sign of the piece of art and the receipt is addressed to the home address. the person who signs the cheques for expenses cant really argue or not include certain items as the md in question is the top of the food chain so to speak.
 
Well one should hope that they are also top of the list of people to explain things on a Revenue Audit. :rolleyes:
 
yeah in a perfect world but that kind of stuff gets shunted of to the Financial controller who started work bout 2 years ago. FC was brought in to tighten things up but when you have a MD almost robbing the place blind with expenses its tough to go int to your bosses office and get them to stop.
where is the liability should md be declaring it as other income or is it up to the company to report it.

if the general staff knew what the was happening they would burn the place down.
 
spankypat said:
yeah in a perfect world
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And in a perfect world everyone would pay their just taxes, the sun would shine on request and the health service would have a budget surplus. :rolleyes:

spankypat said:
where is the liability should md be declaring it as other income or is it up to the company to report it.
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The [broken link removed]in company law for "safeguarding the assets of the company" etc... The directors and the company can be penalised under company law and tax law for proven breaches.

spankypat said:
if the general staff knew what the was happening they would burn the place down.
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In which case they would be subject to the rigours of the law.
 
I am curious about this issue also, but from a tax liability perspective.

In this circumstance where the MD is using company funds for her own use, is there an onus on the company to show this as BIK on her monthly salary calculation and get income tax deducted at source.

In the event of a revenue audit, if the revenue assert that there is tax due on the expenses claimed, would they chase the MD or could they chase the company saying that the co. should have gone the BIK route.
 
henry said:
I am curious about this issue also, but from a tax liability perspective.

In this circumstance where the MD is using company funds for her own use, is there an onus on the company to show this as BIK on her monthly salary calculation and get income tax deducted at source.

In the event of a revenue audit, if the revenue assert that there is tax due on the expenses claimed, would they chase the MD or could they chase the company saying that the co. should have gone the BIK route.
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I would be sure that at year end accounts are prepared by Accountant/Auditor this is brought to director attention and either the director repays the money to the company or the company pays 20/80 income tax as part of the corpartion tax bill and get a refund when director pays back the money. Their is a number of ways to treat it but it would be hard to advise unless you have a draft set of accounts and full facts in front of you.

I would be suprised if an Auditor would sign off if not solved. If non audit risk audit penalties in future( it would not be the tax that would kill you but the interest due, say they come accross it in 5 years time)
 
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Its a tough one for the employees. Certainly the MD shouldn't be getting unvouched expenses and the revenue will want their share when they find out. Also its something the auditors should report on. I'd be surprised if this isn't something they've seen in the past if the expenses are what you say. They wouldn't be happy with the invoices you describe being included as work invoices and wouldn't/shouldn't sign off the audit in those circumstances. However what may be done - and I've seen it in the past - is that the MD is allowed take an amount each month for non work expenses and then at the end of the year this amount is grossed up and tax paid on it as though it were salary.
 
ok thanks,

I guess what I am trying to find out is where the tax liability ultimately lies - with the MD or with the company.
 
henry said:
ok thanks,

I guess what I am trying to find out is where the tax liability ultimately lies - with the MD or with the company.
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This is largely a matter of semantics, in that both parties effectively have a liability. Revenue practice is normally to chase the employer first.
 
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