Expensex

[ladywoman]

Hi everyone,
Please can you tell me if it is correct that if a work related item is purchased by an employee with their own money on behalf of the employer, the money involved is reimbursed through the employee's wages BEFORE deductions resulting in them being taxed twice on the amount in question? Surely it should be after any deductions. Hope you can help

[carrot99]

If it was a small amount I'd have thought you'd be paid from petty cash. For a larger amount you'd give them the item and receipt and they'd reimburse you the total amount in the same way they'd pay any other supplier either by cheque or straight to your bank account. Depending on the item there might be vat due. It's some years since I worked in finance but I don't recall reimbursing staff purchases through payroll.

[barry1010]

I agree with carrot.

[Buenchico]

As long as the relevant expenses meet the five tests here
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim31630
the employer does not have to deduct tax from them
https://www.gov.uk/expenses-and-benefits-cash-sum-payments/rules-for-business-expenses
and therefore they should be added in full to the final payment made after tax has been deducted from the taxable earnings.

The only exception might be where the 'work related item' was some sort of travel expense. For example, back in my teaching days, I could reclaim my bus fares from my employer for going into school (unpaid) on a Saturday morning to run school football teams. However, because my 'expense' involved travel to my regular place of employment, it was deemed to be taxable by my employer.

[ladywoman]

Thank you all for your time replying. The item in question is for a work required medical expense. I am also reimbursed on a monthly basis towards the cost of using my mobile phone for work purposes. This is also paid through my wages before tax deductions, is this right do you think?

[Buenchico]

If your use of your own phone for business purposes meets the requirements of the five tests (as above) then it seems to me that the amount that you've paid out should be refunded to you without tax being deducted.

However your payroll team might be concerned that at least one of the five tests isn't fully complied with. For example, they might think that another employee, doing the same job, wouldn't need to use their phone for such a purpose. Alternatively, they might think that you'd be using exactly the same phone tariff (with the same number of included texts and minutes and the same data allowance)

[Buenchico]

. . . even if you weren't using your phone for work purposes. (Those two examples would fall foul of rules 1 and 4, respectively). If so, they can't pay you for using your phone without deducting tax.

[THECORBYLOON]

Why does your employer not give you a second 'phone to use only for work and then they can pay for its use rather than re-imbursing you?

[ladywoman]

Thanks Buenchico. It seems to me that it would be worth looking into. Thanks again for your help

[ladywoman]

Thanks Thecorbylook - they would but they want me to pay towards it so not going to happen!