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Expenses and benefits in kind: a guide to tax and NICs: how to operate the rules: expenses  

An expenses payment is one that is not pay or benefits and that is made to employees or directors for costs they have met, or will have to meet.

It can be:

  • a reimbursement of expenses already met
  • an advance for expenses to be met
  • a round sum allowance to meet expenses
  • an allowance at a fixed rate intended to meet average expenses - called a scale rate payment.

The amount of the expenses payment that you make is the amount to report where it is taxable and liable for Class 1 NICs. For example, if you pay an employee £200 to meet the cost of a train ticket you must report the payment of £200 unless you have a dispensation.

The quick guide to whether tax and NICs are due tells you which expenses payments are taxable and liable for NICs and tells you how to deal with them. There is more detailed information if you need it.

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