Do expenses payments count as income

Buster_Danog

I posted the following question elsewhere but was advised to post it in the cutting tax section as the people who replied are unsure of the answer.

I am doing some work where I have to travel to different locations but the company I work for has estimated a cost to get to the locations based on motoring costs. I don't have a car but have travelled to these locations by public transport.

So, if I were to accept the estimated expenses payment would HMRC count this as income? I can produce some receipt payments for public transport although these are likely to be less than the amount of the company's estimated expenses payment.

I don't understand the system. One explanation seems to be that travelling expenses lead to a certain amount of your income being non-taxable in some cases. However, if a company pays you money as an expense payment is this a different case where it shouldn't have to be declared as income at all??

Anyone know if an estimated expenses payment counts as income if you don't spend all the money on those expenses??

booksurr

"expenses" means you get back what you paid out

by your own admission you are likely to get back more than you paid out so yes the excess will be taxable

that also assumes of course that the "travel" you are doing is genuinely eligible and is not merely you undertaking ordinary commuting to your place of employment. To be sure of that you will need to give more details about what job you do, why you need to travel to other locations and how long will that travel pattern last

antrobus

Buster_Danog wrote: »

...Anyone know if an estimated expenses payment counts as income if you don't spend all the money on those expenses??

I would have thought that the answer was quite simple; what does it say on your P11D return?

If the expenses to which you refer are taxable, then you will be notifed of that fact by virtue of the P11D, and then it will be down to you to claim your actual expenses and sort it out with HMRC.

However, I would not be surprised, in these circumstances, if your employer had not already reached an agreement with HMRC that this method of paying standard estimated expenses for travel was perfectly reasonable, and therefore obtained a dispensation from reporting them on the P11D, and thus any 'profit' you might make would not be taxable.

TheCyclingProgrammer

Strictly speaking, most expenses payments that are reported on a P11D are considered income BUT in many cases you can claim the equivalent amount back on your tax return as a business expense so long as they are allowable expenses ("wholly, exclusively and necessarily" being the general rule but more specific rules for other things e.g. travel).

Some expenses that you can be paid by your employer are tax *exempt* which means they aren't reported on your P11D, aren't treated as income and aren't taxable. This could include the basic £4/week for working from home or mileage payments within the HMRC limits (AMAPs).

For things like travel expenses, some companies have what are known as "dispensations" from HMRC which allow them to pay travel expenses without having to report them on your P11D, or use scale rates, or both. As these payments are not reported to HMRC they are paid to you tax free and you do not need to claim anything and they do not need to go on your tax return if you do one.

You should still keep evidence of costs incurred for your own personal tax records.

Things might be changing next year as the dispensation scheme is going away and there is a move to try and simplify certain expenses.