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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: effect of reimbursement: reimbursement not claimed

Section 72(2) and Section 334 ITEPA 2003

Effect of reimbursement

In most cases, the fact that an employee receives, or may be entitled to receive areimbursement of their expenses does not affect their entitlement to relief for thoseexpenses under Sections 336-338 ITEPA 2003.

Most employees are taxable on any reimbursed expenses under Section 72(1), and Section72(2) says that the taxation of those reimbursements does not prevent the making of adeduction under any of the expenses provisions. Similarly, Section 334(1) says that aperson may be regarded as paying an amount despite its reimbursement, or any other paymentfrom another person in respect of the amount.

However, there are a number of situations where reimbursed expenses are not subject totax. These include:

  • reimbursements made to employees who are not within the benefits code because they are in lower paid employment
  • payments for which the employer has been given a dispensation under Section 65 (see EIM30050 onwards).
  • payments made under the terms of a Working Rule Agreement (see EIM71300 onwards)

If an employee receives a reimbursement, or other payment, in respect of expenses whichis not taxed, whether for one of those reasons or otherwise, the untaxed amount must bededucted from the amount otherwise deductible under Sections 336-338 (see Section 334(2)).

Reimbursement not claimed

Reimbursements that an employee has not received do not affect theirentitlement to relief. There are no grounds on which you can refuse relief to an employeewho has incurred and paid allowable expenses, and who has for whatever reason refrainedfrom claiming reimbursement from their employer. If reimbursement is subsequently receivedit will be taxed in full under Section 72. Section 330 prevents a double deduction.