Employees naturally expect their employers to reimburse them for any expenses they’ve incurred on their behalf, says Tax Tips & Advice. While these will be free of tax and national insurance when incurred as part of their job, it means employees must collect receipts for every item and their employer will eventually have to process them all.
One way to avoid this hassle is to implement a “scale rate payment” based on the average amount your employee spends a month. “Your employee won’t be required to collect receipts and you won’t need to check or report anything to the taxman.”
To set this up you’ll need an agreement from the taxman, which means you’ll have to show the payments are intended to “do no more than meet your employees’ business expenses”.
Employees don’t need much encouragement as they’ll welcome not keeping receipts and can benefit financially. If, for instance, you pay a meal allowance of £18 and your employee buys a £3 sandwich, they can pocket the remaining cash free of tax and national insurance.