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HMRC internal manual

Tax Credits Technical Manual

Income: Employment income rules - Specific payments and benefits in kind excluded from employment income for tax credit purposes: Expenses

The Tax Credits (Definition and Calculation of Income) Regulations 2002, Reg. 4(5)

Payments in respect of expenses (including the reimbursement of expenses) which are

  • Wholly, exclusively and necessarily incurred in the performance of the duties of the claimant’s employment or
  • Qualifying travelling expenses

Note that these payments would not be excluded from chargeable income for income tax purposes for employees earning £8,500 or more or directors. However, as an equivalent deduction for the value of these expenses can be made from income for tax purposes, the tax credit exclusion achieves the same result. (sections 336 and 337 of ITEPA 2003)