Employment Tax

Incidental overnight expenses

Produced by Tolley in association with Philip Rutherford
  • 05 Jan 2022 14:31

The following Employment Tax guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Incidental overnight expenses
  • Introduction
  • Incidental overnight expenses
  • Tax-free amounts
  • Excessive reimbursement
  • Working rule agreement
  • Reporting requirements

Incidental overnight expenses

Introduction

Typically, if an employer reimburses an employee for personal expenditure when they are travelling for business reasons, these amounts would strictly constitute a taxable benefit on the employee. As the expenditure is on personal items, they cannot be wholly, exclusively and necessarily for the purposes of the duties of the employment.

A statutory exemption from tax and NIC is therefore provided for such small incidental overnight expenses (IOEs) incurred by employees and reimbursed by an employer. IOEs were formerly referred to by HMRC as personal incidental expenses (PIEs); however, there was no effective change of interpretation that came with the change of description.

A key feature of the exemption is that it must be reimbursed by the employer; the relief is not afforded to an employee who unilaterally incurs incidental costs without reimbursement. The purpose of the exemption is to remove burdensome administration from the employer over what should be trivial amounts of tax and NIC. The exemption relates to specific amounts incurred in certain circumstances, which are discussed below.

It is important to note that the IOE term refers to minor personal expenses that are not otherwise allowable on a business journey (examples might include the costs of private phone calls home and buying newspapers). If the employee incurs travel or subsistence expenses on a business journey, these are likely to be allowable separately. See the Travel expenses and Subsistence expenses guidance notes for information on the main allowable travel expenses.

Furthermore, if for example the

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