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HMRC internal manual

Employment Income Manual

Other expenses: flat rate expenses: Section 367 ITEPA 2003

Section 367 ITEPA 2003

The guidance at EIM32700 explains that HMRC negotiates flat rate deductions with trade unions to apply to certain classes of manual employees. Until 5 April 2003 this was done under the care and management powers of the Board of Inland Revenue by Extra-Statutory Concession A1.

From 6 April 2003 Section 367 ITEPA 2003 provides a statutory power to the Treasury to determine the flat rate amounts. In practice the amounts will continued to be negotiated by HMRC on behalf of the Treasury.

The flat rate amounts are intended to represent the average annual expense incurred by that class of employees on the repair and replacement of work equipment. This means the repair, maintenance and replacement of loose tools and special clothing (see EIM32465).

There is a table of amounts agreed for 2008/09 onwards at EIM32712. The flat rate amount is only deductible where the expense falls on the employee. If the employer reimburses the expense, or would do so on request, no deduction is permitted. Where the employer reimburses, or would reimburse, part of the expense, the deduction is reduced accordingly (see EIM32710).

A flat rate expense deduction can only be given in circumstances where the actual expense incurred would be deductible under Section 336 ITEPA 2003. No employee can be disadvantaged by setting a flat rate amount because Section 330(2) ITEPA 2003 allows the actual expense incurred to be deducted for any year instead of the fixed rate amount (see EIM32715).