SE05100 - Emoluments of employees and office holders: round sum expense allowances

Section 19(1)1 ICTA 1988

The payment of a round sum expenses allowance to an employee by his employer is an emolument chargeable under Section 19 (1)1 ICTA 1988 (see SE00510 onwards). PAYE applies to such payments.

A round sum expenses allowance is an allowance which is paid to an employee irrespective of whether he or she spends it or not in a particular way. It is to be contrasted with a reimbursement of expenditure actually incurred by an employee and with a scale rate payment intended to reimburse such expenditure (see SE05200).

Fergusson v Noble (7TC176) supports our view that a round sum expense allowance is taxable under Section 19(1)1 as an emolument. In that case, a detective received a cash allowance for buying civilian clothing whether it was spent or not. It was held to be an emolument chargeable under Section 19(1)1.