3Spoken

Getting It Out – Tax Free Expense Payments

‘Guaranteed’ Tax free payments

Income Type

Taxable payment with allowable deduction.

Company Impact

Fully tax deductible against corporation tax
P11D reporting requirements – dispensation available

Individual Impact

Income Tax due
No national insurance
Income Tax deduction claimed on Tax Return

How much?

  • Professional expenses – If your society is on the list you can claim the cost of the subscription. Enter in Section M of the P11D. Recover in box 1.34 of tax return.
  • Allowable expenses – If your trade is on the list you can claim the amount stated if you incur those expenses. Enter in Section N ‘Other expenses’ of the P11D. Recover in box 1.33 of tax return.
  • Indemnity Insurance – the company can reimburse the cost of insurance cover paid by the individual. No entry on P11D or tax return required.
  • Eye Tests – the company can reimburse the cost of an eye test where employee is required to use a VDU. No entry on P11D or tax return required.

How it works

Very few expense payments come with a guaranteed exemption from national insurance and tax. It is always best to get the employer to pay for everything required by an employee directly (using the company debit card) to avoid complications with the “wholly, exclusively and necessarily” expense rule.

The ones shown above however can be paid without too many problems as long as you qualify under the rules.

(Crazy as it may sound there are different tax rules that apply if an employer contracts for services or goods on behalf of an employee than if an employee contracts for the same services or goods and claims back the cost.)

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