SE62670 - Tax treatment of engineering design employees: guidelines issued by the Federation of Engineering Design Companies - taxation - general

9. General

It is appreciated that members’ employees will present a variety of circumstances, and it will be necessary for each employer to decide in the light of the principles set out above whether or not he is justified in making expenses payments without deduction of tax. He should retain documentary evidence to support the decision he makes, should Revenue Auditors need to obtain confirmation of the circumstances.

Where employees consider that they are entitled to further relief under Section 198(1) where allowances have been subjected to PAYE deductions on payment, they are, of course, entitled to make a personal claim for such further relief to their own Inspector.

Members may wish to consult their local Inspectors as to the amounts of each type of allowance which the Revenue would not regard as being at an excessively high level. The Revenue cannot determine what member companies should pay their employees, but they can give guidance to the employer in establishing a level of expenses allowances above which any further payments should be taxed. Local Inspectors may also be able to give an authority for payment of allowance without deduction of tax in respect of particular individuals or groups of employees whose circumstances can be closely defined by the employer, but this should not be taken as providing any justification for the extension of the authority to other employees or situations not specifically covered in the original negotiations.

Where payments are made without deduction of tax outside the circumstances outlined above, or where the level of payments is excessive, the Revenue’s Audit Division will, in the normal course of events, review an employer’s operation of PAYE, and where necessary effect a settlement of any arrears.