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Understanding scale rate payments

Written by Katie
June 17, 2022
Business News

Understanding scale rate payments:

As an employer providing business or private expenses for your employees, you have certain tax, National Insurance and reporting obligations.

The rules on cash sum payments for business expenses cover:

cash sums you provide to meet the costs of your employees’ expenses
expenses they’ve paid for themselves that you reimburse
‘scale rate payments’ you pay at a level agreed with HM Revenue and Customs (HMRC)
‘round sum allowances’, which you give to an employee regardless of how they spend them

Scale rate payments

If you provide your employees with a set amount of cash to pay for some common business expenses like travel and meals, these are known as ‘scale rate payments’.

As long as your employee has actually spent the scale rate payment on business expenses, you will not need to check every single receipt – it’s fine to just check a sample.

You can set up a scale rate payment by either:

agreeing a scale rate with HM Revenue and Customs (HMRC) by providing evidence of typical expenses (for example receipts)
using HMRC’s benchmark scale rates for subsistence costs

HMRC also provides benchmark rates for employees travelling outside the UK.

What to report and pay

You must report the scale rate payments on form P11D unless they are exempt or no more than the agreed scale rate or benchmarked scale rate. This means you do not have to include them in your end-of-year reports.

You do not need to deduct or pay any tax or National Insurance when reporting scale rate payments.

There are separate rules for individual benefits you provide to your employees. You need to follow specific reporting and payment rules for different items, including travel, meals and accommodation.

Payments for private expenses count as earnings.

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We offer a wide range of services which are unique to your businesses who are just getting going! Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

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