EIM01110 | Employment income: expenses payments and reimbursements

Sections 62 and 72 ITEPA 2003

Money will often be paid to an employee to make good an expense that has been incurred in the performance of the duties. Such payments are not earnings within section 62 ITEPA2003 (see generally EIM00515).

For example, a salesman who is reimbursed the cost of an air ticket bought to enable him to visit a client does not receive a payment of earnings as defined in section 62. Similarly a doctor who is reimbursed the cost of a call from his home telephone to the hospital to enquire about a patient’s condition does not receive a payment of earnings, as defined in section 62.

Unless the recipient is in lower paid employment, section 72 deems the payments in these two examples to be earnings. No tax would be payable however because a deduction would begiven under the expenses rules in Part 5 Chapter 2 ITEPA 2003 (see EIM31620 onwards).

In some circumstances (for example a payment of a home to work mileage allowance) it will be clear that although a sum is described as being a payment for expenses no deduction can be given. A payment of this sort will be taxable as earnings within section 62.

Businesses are often run in such a way that employees make payments on their employer’s behalf. For example an employee may buy stamps for the employer and be paid from petty cash. This transaction is outside the scope of section 62 and section 72: the employee has received no money of his own on which we could make such a charge.

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