EIM66780 | Tax treatment of National Health Service employees: expenses payments and allowances: particular allowances

From HM Revenue & Customs · Employment Income Manual

The following table sets out the tax treatment of the NHS expenses allowances and payments that you are most likely to meet. As regards car allowances, see also EIM31200 onwards.

Type of allowance, payment or benefit	Tax treatment
Private use of allocated cars	Where official vehicles are allocated to NHS employees, the appropriate car benefit charges may apply (see EIM23000 onwards)
Removal and associated expenses	‘Removal expenses’ will be exempt if the relevant conditions at EIM03100 onwards are satisfied.
	‘Excess rent allowances’ should be dealt with in accordance with EIM02000 onwards.
	‘Advances of salary for house purchase’ are not earnings within section 62 ITEPA 2003. There is a charge to tax under section 175 ITEPA 2003, which deals with beneficial loan arrangements (see EIM26101 onwards).
	(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Home to work travel	‘General’. The fundamental principle is that a payment to an employee in respect of travelling between home and a permanent workplace counts as earnings within section 62 ITEPA 2003 (see generally EIM00515 onwards). There can be no corresponding deduction due in these circumstances under section 337 or 338 ITEPA 2003 (see EIM32356 and EIM32240). However, see below as regards travelling expenses paid following an emergency call-out.
	See also EIM03112 as regards travelling expenses paid in connection with removal.
	‘Hospital medical and dental staff’ may be paid additions to mileage allowances for some journeys. Broadly, these additions cover ordinary commuting, and the authority should subject them to PAYE, except where they relate to an emergency call-out (see below).
	‘Emergency call-out’ expenses paid in respect of travel between home and a permanent workplace are, in general, taxable (see above). Where, however, employees can demonstrate that they have embarked on their duties before starting their journey and are then travelling in the performance of those duties, the payments they receive are in respect of business mileage (see EIM10040 and EIM32240).
	If they cannot demonstrate this, the journey is not business mileage. Any reimbursement of fuel expenses in respect of such a journey therefore involves the provision of fuel for private motoring. If the journey is made in an official car for which the employee is charged to car benefit, there will be a car fuel benefit charge instead of a charge on the proportion of the expenses that relate to fuel. If the employee is paid a flat rate call-out fee there is no fuel benefit charge unless fuel expenses are also reimbursed.
	Some NHS (in Northern Ireland, HSS) employees will be able to show that when travelling to their normal place of employment as the result of an emergency call-out they are travelling in the performance of their duties (see above). To avoid the need for each such employee to make a separate claim to his or her tax office, a simplified procedure has been agreed with the Department of Health under which employees may claim reimbursement of emergency call-out expenses from employing authorities without deduction of tax.
	The form on which NHS employees claim reimbursement of travelling expenses from employing authorities incorporates the following certificate:
	“Except where indicated above, I certify that advice was given on the handling of the emergency before starting my journey and I accepted full responsibility for those aspects appropriate to my duties from that time. (Journeys which I consider do not qualify for tax relief are shown separately above.)”
	Where the employee signs the certificate, the relevant expenses payment is made in full without deduction of tax under PAYE. Where the certificate is not signed, or a particular journey is shown as not qualifying for tax relief, the payment is taxed under the normal PAYE arrangements (but see above as regards the reimbursement of fuel expenses).
Emergency vehicles	Where certain conditions are met, there is no charge to tax for the private use of an emergency vehicle for the persons employed in the provision of ambulance or paramedic services (see EIM23600 onwards).
	From the 2017/18 tax year the terms on which the emergency vehicle is made available must prohibit its private use otherwise than when the person is travelling between two places that is for practical purposes regarded as ordinary commuting.
Late night duties	Any night duty allowances paid count as earnings within section 62 ITEPA 2003 (see generally EIM00515). Meal allowances are also chargeable (see EIM01530).
Uniform and everyday clothing	Many health authorities make some kind of provision for clothing for employees working with the public. Some of the employees wear uniform or special and distinctive clothing which, because of its style, colour, etc., identifies the wearer as a member of a particular group. It will thus not be suitable for general everyday wear. No liability to tax will arise on payments in cash towards the cost of such uniform or distinctive clothing, or on the provision of the uniform itself (see EIM10400). However, if cash payments are excessive, liability can arise on the profit element.
	Where the clothing is suitable for general everyday wear (whether or not it is in fact so worn) cash allowances towards its purchase are taxable. Where, however, instead of making cash payments to employees for such clothing, it is purchased and retained by the employing authority and kept only for the employee’s use on duty, liability to tax arises unless for the tax years 2015 to 2016 and earlier the employee is in an excluded employment (see EIM20007). The assessable benefit is 20% of the market value of the clothing when first applied as a benefit plus expenses incurred on its maintenance, etc. (see EIM21632). Although this is the position in law such a tax charge is likely to be small and unless the circumstances are exceptional it may, in practice, be regarded as negligible and ignored.
Telephones	Follow the guidance at EIM07800.
Garaging allowances	Follow the guidance at EIM01400.
Tool allowances	Where a tool allowance is paid, it counts as earnings within section 62 ITEPA 2003 (see generally EIM00515 onwards). The employer should operate PAYE, or any flat rate expenses allowance should be reduced by the amount paid by the employer.