PT21 Expenses of Employment

Question 1

When will a deduction will be given in arriving at net taxable earnings if an employee incurs an expense?

Answer 1

If it was ‘wholly, exclusively and necessarily’ incurred, which is a strict test.

Question 2

Travelling expenses?

Answer 2

Qualifying travel expenses are deductible but exclude ordinary commuting (ie home to work). Travel from the office or from home to a temporary workplace (not more than 24 months) will be deductible.

Question 3

Professional fees and subscriptions?

Answer 3

deductible provided they are paid to an approved body.

Question 4

Client entertaining?

Answer 4

Yes, if the amount has been disallowed in the employer’s tax calculation and the employer has either reimbursed the employee’s expenses or paid a round sum allowance specifically for entertaining. (If it’s a mixed round sum allowance you’re screwed)

Question 5

Reimbursement?

Answer 5

The payment or reimbursement of fully allowable expenses by the employer is exempt income.

Question 6

Round sum allowances?

Answer 6

Round sum allowances which do no more than reimburse qualifying business expenses will be exempt from tax.

Otherwise, the allowance will be taxable in the first instance but a deduction can be claimed for what is spent on allowable expenses. However, this excludes any amount spent on client entertaining.

Question 7

What’s a payroll deduction scheme?

Answer 7

Payments to charity can be made via the Payroll Deduction Scheme whereby the payment is made gross and is deducted from salary before applying PAYE to give relief.

This is an alternative to obtaining relief via Gift Aid.