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Reimbursing allowances

Employers may pay reimbursing allowances to employees to compensate for on-the-job expenses.

Definition

These payments can include allowances for:

  • meals
  • mileage - see also Travelling allowances>
  • tools.

Are reimbursing allowances  taxable?

No. However, if the payment is more than the employment-related expenses, the excess is taxable.

What do I have to do?

You can make a reasonable estimate of the costs incurred by an employee and treat this as if it was the amount paid out by the employee, or you can use actual receipts.

  • Add the amount of the allowance to your employees' net salary or wages (ie after PAYE) when you pay them.
  • Do not show the tax-free amount on your Employer monthly schedule (IR348).
  • Show the total amount of the tax-free allowance paid in your wagebook.