SE05200 - Emoluments of employees and office holders: scale rate expenses payments

Section 19(1)1 ICTA 1988

Many employers pay or reimburse, at scale rates, expenses incurred by employees in performing their duties. Subsistence payments are a common example.

A scale rate payment which is calculated to do no more than reimburse the average expenditure incurred by employees on allowable expenses will not be regarded as a round sum allowance ( SE05100). The employer can be authorised to make the payments without deduction of tax under PAYE. See Booklet 490, Section 9.6 onwards.

However, it is important that you only apply that treatment to appropriate items. In general, scale rates are only appropriate for expenses which are widely incurred, in broadly similar amounts, but for which it is often difficult to get receipts. For example subsistence expenses, or the cost of cleaning uniforms or protective clothing (see SE32465). Scale rates should be set at a fairly modest level which, taking one day with another, will be enough to cover the relevant expenses. They should not be pitched at a level to cover the highest amount that an employee might spend.

And scale rate expenses payments should only be paid on days when the employee has incurred an allowable expense. A “scale rate payment” which is paid irrespective of whether the employee has incurred an allowable expense is simply a payment of earnings within Section 62 ITEPA 2003 (see EIM05100).For 2002/03 onwards, mileage allowance payments made to employees who use their own vehicle or bicycle for business travel should be dealt with under the approved mileage allowance payments scheme (see SE31250 onwards).