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What general expenses can you claim under PAYE

25 June 13 | By: Jas Jhooty

Deductions for expenses: the general rule


Section 336 ITEPA 2003 defines the general rule for non-travel related expenses. (Click here to see how travel expenses are treated for tax purposes) This general rule for employees’ expenses is extremely restrictive. All of the tests imposed by Section 336 ITEPA 2003 must be passed before a deduction is obtained. The wording of each part of this act has been tested in the law courts on many occasions

Wording of the act

The tests that apply before a deduction can be permitted under Section 336 are
  • the expense must be one that each and every holder of that employment would have to incur
  • the expense must be necessarily incurred,
  • the expense must be incurred in the performance of the duties of the employment,
  • the expense must be incurred and paid ,
  • the expense must be wholly and exclusively so incurred.

Each and every holder

Expenses can only be allowed if they are incurred by the employee as holder of the employment. It does not refer to the expenses incurred by any individual holder or a holder of an employment.

This means that the test is an objective one. It looks at the requirements of the job itself rather than the circumstances or preferences of any particular individual doing it.

It follows that an expense is only deductible if it is an expense that each and every holder of that employment would have to incur.

E.g. A salesman wants to claim the cost for their glasses that they require for driving. As not all salesmen require glasses to drive, this cost is non-allowable.

Necessarily incurred

An expense can only be allowed if it is necessary for each and every employee to perform their duties of employment. If it is necessary, there is no restriction to the amount that can be claimed For example two employees may have to travel for business. One decides to take the bus, the other decides to travel on the train. Both costs are allowable.

In the performance of the duties

The expense must be incurred in actually carrying out the duties of the job. It is not enough for the expense to be relevant to the job, or to be incurred in connection with the duties of the job. Nor is it enough if the expense only puts the employee in a position to start work (i.e travelling costs to work are non-allowable) or keeps the employee qualified to do the work. Expenses that are incurred in preparation to carry out the duties of the employment or as training to carry out the duties of the employment are not deductible.
NB Employer funded training is non-taxable

Incurred and paid

The amount of the deduction is limited to the amount of the earnings from which it is to be deducted. Surplus expenses cannot be claimed from any other source of income.

Wholly and exclusively

The words “wholly” and “exclusively” prevent a deduction for expenditure that serves a dual purpose, a business purpose and a non-business purpose.

An example of dual purpose expenditure is money spent on ordinary clothing that is worn at work. Clothing that is worn both in work and out of work obviously has a dual purpose and so no deduction is allowed. However, even if the clothing is only worn at work no deduction is allowed. This is because at one and the same time the clothing has the purpose of providing cover and comfort to the employee as well as the purpose of being suitable for work.
You may remember that newsreader Sian Williams recently lost an appeal for the cost of smart clothes that she required to present the news, based on this principle.


All of these conditions combine together to make it very difficult for employees to claim expenses that they (and most other reasonable people) think should be allowable.

How emTax can help

Our consultants are experts in the interpretation of this legislation. If you come across any difficulties with HMRC attacking your employees’ expenses reimbursements please do not hesitate to contact us.


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