Cost of living allowances, other expenses and benefits

Produced by Tolley in association with

Employment Tax

Guidance

STOP PRESS: The remittance basis is abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in FA 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.

General principles

An employee may receive a payment from his employer as reimbursement of an expense incurred as part of his employment duties. These payments are not earnings within ITEPA 2003, s 62 and are therefore not taxable under that provision. Many reimbursed payments are considered as earnings under ITEPA 2003, s 72 but if a deduction would be available for the same amount under the expenses rules, the reimbursement is exempt under ITEPA 2003, s 289A (see the Expenses ― general rule and Expenses and benefits matched by allowable deductions guidance notes).

In some circumstances (eg a payment of a home

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Sarah Robert

Director at James Cowper LLP

Sarah Robert is a Business Tax director.Sarah heads up James Cowper's expatriate tax services. She assists corporate clients moving employees overseas and into the UK as well as companies and entrepreneurs setting up in the UK for the first time.With extensive international experience in Big 4 firms, Sarah moved to James Cowper in 2009 and now advises a varied portfolio of companies. She is experienced in a wide range of taxation issues including; employment taxes, international payroll, international social security planning, double tax treaty advice and HMRC enquiries. She has a particular expertise in advising French companies and individuals and having worked in France herself, Sarah has a good understanding of international business challenges.

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