For an employee to receive expenses tax free the expenses must have been necessarily incurred in the performance of the duties of their employment. So buying a newspaper every morning on the way to work wouldn’t be a legitimate expense unless you’re involved in media, current affairs or advertising, then it would be. Similarly buying lunch at McDonald’s isn’t a business expense as you don’t need your lunch to be a nurse, teacher, accountant etc.. You may be hungry but you should still be able to do your work.
One long-established tax law principle on expenses which catches-out many people is that any expenses incurred in travelling to or from your home are not expenses which your employer can reimbursed tax free.
Legitimate expenses can be reimbursed in a number or ways based on;
- vouched receipts,
- flat rate mileage and subsistence rate (which cannot exceed civil service rates) or
- flat rate civil service mileage and subsistence rates.
If using a flat rate reimbursement method a record must be kept to support the claim including:
- date of journey
- reason for journey
- distance travelled
- starting point, destination and finishing point
- starting and finishing time