IR20                                     29 November 1994

    EXEMPTION FOR PERSONAL INCIDENTAL EXPENSES PAID BY
                         EMPLOYERS

The  Chancellor proposes in his Budget to introduce a new exemption:


for    payments   by   employers   of    employees' miscellaneous
personal expenses when they stay away from home overnight on business
                                                          
of up to Pounds 5 a night for stays in the United Kingdom
(or  up to Pounds 10 a night for stays outside the United Kingdom).

The  Chancellor's intention is to introduce a deregulatory measure
which will reduce employers' compliance costs.

The measure is to take effect from 6 April 1995.


                          DETAILS

1.    When  employees  stay away from  home  overnight on business
they  often incur personal incidental  expenses.  The most common
are newspapers, telephone calls home  and laundry. Employers often
pay for these expenses.

2.    Payments  of  this  sort made  by  employers  - and benefits
provided  -  are taxable, because  the  expenses rules for
employees  give  relief  only  for   expenses necessarily incurred in
the performance of the duties.

The new exemption

3.    The  Chancellor proposes to change the law  so that employers
can pay for personal incidental expenses up to a de minimis limit
without any tax consequences.  The limit will  be Pounds 5 a night in the
United Kingdom and Pounds 10 a  night outside  the United Kingdom.  But if
employers  pay  for amounts over the limit, the whole amount becomes
taxable.

4.    Employers pay for these miscellaneous expenses in a variety
of ways.  They might give employees an  allowance of so much a night
for these expenses, or reimburse actual expenses,  or provide
non-cash vouchers or  credit-tokens such  as credit cards, or pay the
hotel bill direct.   The new  exemption will cover all these
arrangements  and  the wide  variety  of incidental expenses which
employers  may pay to employees when they are away from home on
business.

5.    Where  employees qualify for relief for the expenses of
foreign  travel  under  the  existing  law,  the  new exemption  will
apply equally to their personal incidental expenses.

Deregulation

6.    Employers  who  take advantage of  the Chancellor's proposal
and pay up to the de minimis limit will no longer have to examine
hotel bills to extract information for tax purposes nor make returns
of the information to the Inland Revenue.  Employees do not have to
claim the new relief.

7.   If an employee is away for several nights in a row it will  not
be  necessary to look at each night separately.  The total  of  the
exemption for each  night  away  (for example, four nights at Pounds 5 a
night equals Pounds 20) can  simply be  set  against  all the miscellaneous
personal  expenses paid for by the employer.

Cost

8.  The  estimated  cost  of the measure  is  about  Pounds 20 million 
a year.

National Insurance Contributions

9.    The  Department of Social Security will be bringing forward
Regulations  to parallel the  new  exemption  for National Insurance
Contributions purposes.

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