Where an employee has or incurs a personal liability, which is then met directly by the employer (that is, by the employer paying the supplier directly rather than reimbursing the employee), the default position is that this will constitute earnings for both tax and NIC purposes. An exception may apply if the employee can be said to be making a legitimate and allowable business purchase.
Assuming no exemption applies so that income tax and NIC is due, the methods by which tax is required to be accounted for tax may well differ from the method of accounting for NIC. This method of NIC accounting may in turn vary, if the employee can be said to have been acting as agent for the employer when making the purchase. Each of these possibilities is discussed further below.
Employer reimbursement relates to an allowable expense, is covered by another tax charge or a statutory exemption
A tax and NIC exemption applies to expenses payments or reimbursements and benefits (which might otherwise be treated as earnings),
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Web page updated on 17 Mar 2025 13:35