HMRC internal manual

Employment Income Manual

EIM01110 - Employment income: expenses payments and reimbursements

Sections 62 and 72 ITEPA 2003

Money will often be paid to an employee to make good an expense that has been incurred in the performance of the duties. Such payments are not earnings within section 62 ITEPA2003 (see generally EIM00515).

For example, a salesman who is reimbursed the cost of an air ticket bought to enable him to visit a client does not receive a payment of earnings as defined in section 62. Similarly a doctor who is reimbursed the cost of a call from his home telephone to the hospital to enquire about a patient’s condition does not receive a payment of earnings, as defined in section 62.

Unless the recipient is in lower paid employment, section 72 deems the payments in these two examples to be earnings. No tax would be payable however because a deduction would begiven under the expenses rules in Part 5 Chapter 2 ITEPA 2003 (see EIM31620 onwards).

In some circumstances (for example a payment of a home to work mileage allowance) it will be clear that although a sum is described as being a payment for expenses no deduction can be given. A payment of this sort will be taxable as earnings within section 62.

Businesses are often run in such a way that employees make payments on their employer’s behalf. For example an employee may buy stamps for the employer and be paid from petty cash. This transaction is outside the scope of section 62 and section 72: the employee has received no money of his own on which we could make such a charge.

See also:

EIM02000 Additional housing cost allowances
EIM01030 Car parking expenses or facilities
EIM01060 Club membership fees
EIM10060 Detached duty
EIM10040 Emergency call-out
EIM01120 Financial loss allowance
EIM10150 Fixed profit car scheme (FPCS)
EIM01400 Garage allowances
EIM01530 Meals: cash allowances to employees
EIM01550 Medical expenses and insurance
EIM03100 Removal or transfer expenses
EIM05100 Round sum expense allowances
EIM05200 Scale rate payments
EIM07800 Telephone expenses
  ### Training costs:
EIM01200 onwards Further education/work-related training
EIM05005 onwards Retraining expenses
EIM10000 onwards Travelling and subsistence payments
EIM10400 Uniform allowances