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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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The general rule for employees expenses: key words and phrases

 

The general rule for employees’ expenses is very restrictive. All of the tests imposed by Section 336 ITEPA 2003 must be passed before a deduction is obtained. The tests are stringent and exacting, see EIM31636. It is important that you get all of the facts before you make a decision, see EIM31635.

A deduction should only be given to the extent that an expense has actually been incurred. This is illustrated by examples at EIM31631, EIM31632 and EIM31633.

The rules for travelling expenses are different to the general rule for employees’ expenses, see EIM31810.

The tests that apply before a deduction can be permitted under Section 336 are

  • the expense must be one that each and every holder of that employment would have to incur, see EIM31640
  • the expense must be necessarily incurred, see EIM31645
  • the expense must be incurred in the performance of the duties of the employment, see EIM31650
  • the expense must be incurred and paid , see EIM31655
  • the expense must be wholly and exclusively so incurred, see EIM31660.

There is a useful summary of these tests in paragraph 8 of the judgment of Lightman J.in Ansell v Brown (73TC338).