The following Tax guidance note provides comprehensive and up to date legal information covering:
In addition to salary and other pay-related items such as overtime and bonuses, many employers will reimburse employees for work-related expenses and provide benefits for both incentivisation and reward. The tax treatment of non-cash earnings is discussed in Practice Note: How employment income is taxed—non-cash earnings or benefits.
At Budget 2014, a number of measures aimed at simplifying the administration of employee benefits and expenses were announced. This followed the Office of Tax Simplification's 2014 report on its review of employee benefits and expenses. The package of four measures, which took effect from 6 April 2016, included two items which fundamentally affected the payroll operation in respect of expenses and benefits, namely:
abolishing the dispensation regime and replacing it with a statutory exemption for tax on paid and reimbursed expenses, and
introducing a system of collecting income tax in real time through the ‘payrolling’ of certain benefits-in-kind
This Practice Note sets out the payroll operation on expenses and benefits following those changes, as well as a brief description of the regime as it stood pre-April 2016.
In practice, the distinction between an expense and a benefit may be blurred (an employer reimbursing a restaurant bill, for instance, could be either an expense or a benefit, depending on the circumstances) and
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