SE35090 - Travelling expenses: employees working but not domiciled in the United Kingdom - expenses borne or reimbursed by or on behalf of the employer

Section 195 ICTA 1988

The deductions for non domiciled employees travelling to work in the United Kingdom provided by Section 195 only apply when the employer ultimately bears the cost. The cost may be met:

• Directly or
• By reimbursing either the employee or a third party who initially met the cost

This approach provides a built-in test. It limits the deductions to the amounts the employer is prepared to pay.

The deductions are available against emoluments chargeable under Case I of Schedule E. Payments are normally assessable under Section 19(1)1, Section 141 or Section 142 or Section 153 ICTA 1988.

It follows that if what the employer pays is not chargeable as emoluments falling into the Cases of Schedule E then no deduction can be given.

Round sum allowances

A general increase in pay or a round sum allowance does not amount to a “reimbursement” or to the employer being regarded as having borne the cost. However, a common sense approach should be taken. Do not refuse to accept a deduction simply because the employer meets expenditure by reasonable and properly controlled scale payments.

Double Taxation Treaty Exemption

Employees who work in the United Kingdom for a very short time may be exempt from charge to income tax under the provisions of a Double Taxation Agreement (see DT220 and DT1920).