Expense payments received

By Tolley

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

  • Expense payments received
  • Expenses
  • Exempt expenses
  • Balancing charges

The entry in box 16 on the Employment supplementary pages  to the Tax Return is the total cash equivalent of expense payments made to or on behalf of the employee / director as reported in section N of the form P11D .

The P11D shows a breakdown of the common expenses, such as travel and subsistence and entertainment expenses which helps the Tax Return preparer decide whether to make a claim for business expenses. For more on these claims, see the Business travel and subsistence expenses guidance note.

To be taxable on the employee / director, the expense must have been provided by the employer ‘by reason of employment’. A benefit provided to a member of the employee’s family is taxable on the employee (unless the family member is also an employee, see EIM20505). See the Employment income guidance note.

If the expenses are business-related, no benefit arises from 2016/17 onwards due to the exemption for payments where there is a corresponding allowable deduction. For 2015/16 and previous tax years the employer needed to report the amounts on the P11D unless there was a dispensation in place. See the Dispensations (for tax years prior to 2016/17) guidance note for more details. There is no national insurance liability if the payment is in respect of specific and distinct business expenses actually incurred by the employee in carrying out his work.

ITEPA 2003, ss 289A–289E; EIM30200

Similarly, if the employer has a PAYE Settlement Agreement (PSA) with HMRC under which it has agreed to pay the tax due on certain items on behalf of the employee or director, these benefits / expenses must not be reported on the P11Ds. See the PAYE settlement agreements guidance note.

The guidance below assumes that the expense is not incurred for a business purpose, and is therefore taxable and subject to national insurance, and it is not included in

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