Expenses and benefits: cash sum payments to employees

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Rules for business expenses

In general, something only counts as a business expense if your employee needs it to do their job. You do not have to deduct or pay tax and National Insurance on qualifying business expenses, but you need to make sure that they meet all of HM Revenue and Customs’ (HMRC) criteria for:

• employees’ business expenses (tax)

• employees’ business expenses (National Insurance)

Business travel

Costs relating to business travel also count as business expenses, unless the travel is in the employee’s own vehicle.

For more details, see the guides on:

• travel expenses
• business travel mileage for employees’ own vehicles

What to report and pay

You must report the cost of the expenses on form P11D. You do not need to deduct or pay any tax or National Insurance.

Some business expenses are covered by exemptions (which have replaced dispensations). This means you will not have to include them in your end-of-year reports.

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