Round sum allowances

By Tolley

The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Round sum allowances
  • Introduction
  • Round sum allowances
  • Advances of expenses
  • Scale rate payments / incidental overnight expenses
  • Fixed rate deductions


Round sum allowances are amounts paid by an employer to an employee to cover future expenditure by the employee. Round sum allowances differ from the reimbursement of actual expenses, scale rate payments and fixed rate deductions.

Round sum allowances

Round sum allowances are normally taxable and subject to NIC as earnings because they are just money available to the employee to be spent. Employers should include the amount in the employee’s payroll and subject the amount to PAYE. The courts have held that round sum allowances, even if they are intended for use on certain business-related expenditure, are taxable as earnings.

ITEPA 2003, s 62

The case of Fergusson v Noble held that a round sum expense allowance is taxable as part of the employee’s earnings. In th

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