Expenses which are reimbursed

Most of the expenses you incur at work as an employee are paid for by your employer. Other work expenses – particularly travel and accommodation expenses – are reimbursed by your employer.

When an expense is reimbursed, HMRC has to be satisfied that the expense is allowable for tax purposes, otherwise the reimbursement from your employer is treated as additional taxable income.

Example: Alison is a sales manager. She is asked to attend a special sales event in the evening. She pays a babysitter to look after her children. The employer reimburses her for the cost of the babysitter. HMRC would not consider that the expense was allowable. It would not have been necessarily incurred by any holder of the office of sales manager. Tax would therefore be payable on the reimbursement.

(See http://www.hmrc.gov.uk/manuals/eimanual/EIM31648.htm)

If you are reimbursed for work related expenses then usually your employer will pay you at rates agreed with HM Revenue and Customs to produce no tax liability.

(Where there is a specific agreement between HMRC and your employer that this is called a dispensation. See http://www.hmrc.gov.uk/manuals/eimanual/EIM30051.htm. )

Some reimbursed expenses are not taxable. These include provisions of bicycles, parking, and nursery provision for example. Specific conditions apply so care is needed. You can find a list of the expenses on the HMRC website at http://www.hmrc.gov.uk/manuals/eimanual/EIM21241.htm. There a special rules on employer supported childcare – see http://www.hmrc.gov.uk/manuals/eimanual/EIM22012.htm .

You may need to take advice on your specific circumstances, or look at the examples on the HMRC website (http://www.hmrc.gov.uk/manuals/eimanual/EIM31610.htm).