But before judging MP's handling of expenses, perhaps we should all check our own houses are in order, as any variation from HM Revenue and Customs compliance will come back and bite, so there has to be a clear and unambiguous process.
The foremost problem with the MPs is not so much what was claimed, but that the Fees Office allowed them to be claimed. Just like the MPs, every industry is at risk if it doesn't keep everything clean and above board.
To give us a starting point in reviewing the matter, we need to fully understand the term ‘expenses' and how this can be interpreted so differently and exploited by certain individuals:
The Inland Revenue defines the term as "costs incurred, wholly, exclusively and necessarily in the performance of your duties provided".
"Costs incurred"
The controversial reports regarding MPs' extensive misuse of the Government's expenses system explicitly shows to what extent this term can be misinterpreted.
'Costs incurred' refers to the first key rule of any claim - the expense must have been incurred.
Unlike recent news reports, all costs must have evidence that payment has been received. This is why most companies request a VAT receipt, and that some companies can rightly refuse to recharge a claim if no receipt can be presented.
"Wholly"
This simple term focuses on the fact an expense must be incurred by the claimant and not something received in part or as a shared cost. A perfect example of this is to look at how recent MPs have claimed expenses on the back of relatives sharing houses, etc.
"Exclusively in the performance of your duties provided"
This part of the statement specifies that any claim must be made, exclusively in the performance of a specific ‘company' duty. For example, taking a client to lunch is defined as entertainment and not technically tax deductible, but if you were to visit a client away from your own company office area and pay for their lunch, that could be deemed a legitimate expense. It is an area that needs to be defined for everyone's benefit in the company expense guidelines.
This also raises the issue of subsistence, - non-receipted claims for food / travel etc - commonly exploited by subcontractors to bolster income. But in some cases, these expenses have not been incurred, the Inland Revenue would argue, exclusively in the performance of duties as you have to eat to survive.
"Necessarily in the performance of your duties provided"
The final part of the phrase attempts to prevent types of claims for unusual items, such as those we now see hitting the headlines - claiming an annual golf course membership or the cleaning of a moat, for example.
These claims, as part of a necessary expense in the performance of some MPs' duties, clearly demonstrate how this system has and can be abused. If a fraudulent claim is made and the Inland Revenue becomes aware of it, the individual will be investigated and held liable for the underpayments and any associated penalties. As the Inland Revenue reserves the right to investigate individuals at random, if you do not retain good and accurate records then you could be liable for penalties
.
Matthew Partridge is a senior manager at umbrella firm Zeva
How the term 'expenses' is open to misinterpretation
Given the recent and very public press attention on the subject of expenses, what has always been perceived as a dry topic is now very much on the conversational agenda -- from dinner parties to mulling over the matter with colleagues by the works coffee machine.
