What expenses are taxable?

This is a complicated area of taxation law and it is only possible to give a broad outline answer.

Under general taxation law some, but not all, expenses payments (and benefits) are taxable. In recent years legislation has extended the scope of taxation on expenses and currently all Directors (with a few exceptions) and employees earning £8,500 pa or more are liable. This does not mean that they necessarily have to pay tax on the full amount. 'Expenses deductions' may be made from expenses, according to the rules, resulting in a net figure only being taxable.

Examples of expense payments made to employees which are taxable include those in connection with:

• travelling
• mileage
• entertainment
• company credit cards
• relocation of home (at the request of the employer or on starting a new job)

Expense deductions are permitted for each of these items in accordance with Inland revenue rules. For instance the first £8,000 of expense payment for removal will be exempt taxation.

The list is not exhaustive.

As the identification of which expenses, or part of expenses, and the calculation of tax due, are complex issues, should you require further guidance you should contact your local tax office.