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HMRC internal manual

Employment Income Manual

The benefits code: expense payments and benefits: how the special rules apply

Sections 6 and 7 ITEPA 2003

EIM20010 explains when the special rules apply for expense payments and benefits.

The amount of the expense payment, or the cost of the benefit, is treated as general earnings (Section 7(5) ITEPA 2003) taxable as employment income (EIM00511) under Section 6(1)(a) ITEPA 2003.

From the amount of earnings a deduction is made for:

  • any amounts which the employee reimburses to the person (usually the employer, but not always) who makes the payment or provides the benefit and
  • any items which qualify the employee for an expenses deduction, for example under Section 336 ITEPA 2003 (EIM31610 onwards).

If an Inspector is satisfied that no tax would be payable, for example, because an equivalent expenses deduction would be due, a dispensation can be given which exempts the expenses and benefits from charge (EIM30050 onwards).

For more information on:

  • the provision of benefits, see EIM20020 onwards
  • the payment of expenses, see EIM20600 onwards.