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Introduction

This guidance note discusses the general rule for expenses incurred by employees to be deductible for tax and NIC. This rule applies to any expense; in addition to this general rule, there are many specific rules for specific types of expenditure which are set out in the other guidance notes in this topic. The rule for expenses of employment is stricter than those for expenses incurred by business or the self-employed and so needs to be looked at carefully to ensure any expense meets the requirements.

In order to get tax relief on an expense, an employee must be able to satisfy the strict rules outlined in legislation and developed in case law. This applies whether the expense is reimbursed by the employer or met by the employee with no reimbursement from the employer.

In order to obtain a deduction, the expense incurred by the employee must satisfy all of the tests laid out in ITEPA 2003, s 336, ‘the general rule’. There is a long line of case law which interprets the key phrases.

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