Expenses payments made on behalf of the employee cover situations where an employer settles or reimburses costs that provide a personal benefit, or where payments fall outside exemption rules and therefore become taxable. This includes areas such as non-business entertainment, private travel, excess business travel reimbursements, and non-qualifying relocation costs.
The key distinction is that the employer is meeting a cost that is not wholly, exclusively, and necessarily incurred for business purposes, or is paying more than the amount that would be considered exempt under HMRC rules. Where this happens, a taxable benefit arises.
Within the BIK module, this benefit type is structured across multiple event types to reflect how the expense arises (who arranges and who pays) and the resulting Income Tax and National Insurance treatment. Selecting the correct event type ensures the expense is processed correctly through payroll and reported appropriately.
This benefit should not be used for fully exempt business expenses processed through normal expense procedures, or for items that fall into more specific benefit categories, such as company cars or qualifying relocation.
This article explains how these events should be applied with BIK module considerations and how to calculate the benefit value. Below are some other articles to assist with preparing and processing benefits in the BIK module:
- For creating this benefit type at company-level, go to Configuring Company Benefits
- For applying benefits to employee records, go to Applying Benefits to Employees: Manual & Data Imports
- For how this looks in Payroll when processing, go to How Payrolled Benefits are Reflected in Payroll
- For National Insurance and Best Practices, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.
Contents
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Event Type: Non-business entertainment - employer arranges and pays
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Event Type: Non-business entertainment - employee arranges, employer pays
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Event Type: Non-business entertainment - employee arranges and pays, employer reimburses
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Event Type: Private Travel - employee arranges and employer pays supplier directly
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Event Type: Private Travel - employee arranges and pays, employer reimburses
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Event Type: Business Travel - reimbursed more than the necessary cost
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Event Type: Non-Qualifying Relocation - employer arranges and pays
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Event Type: Non-Qualifying Relocation - employee arranges and employer pays supplier directly
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Event Type: Non-Qualifying Relocation - employee arranges and pays, employer reimburses
BIK Module Configurations and Considerations
Expenses payments made on behalf of the employee can arise either as one-off transactions or as payments linked to a specific period. The correct configuration depends on whether the expense relates to a single event (for example, a reimbursed trip or entertainment cost) or spans a defined timeframe.
This benefit type contains multiple event types because the tax and National Insurance treatment depends primarily on who arranged the expense and how it was paid. Selecting the correct event type ensures the appropriate payroll treatment is applied.
One-Off Events
Most scenarios within this benefit type will be one-off events, such as:
Reimbursed private travel
Non-business entertainment costs
Excess business travel reimbursements
Non-qualifying relocation payments
In these cases, the full taxable value arises at the point the payment is made or reimbursed.
Company-Level Configuration
When configuring this benefit at company level:
To ensure the taxable value is always fully applied, set the benefit to retain until the end of the tax year for leavers
Since this is a single transaction, do not configure pro-rating based on duration of employment
Employee-Level Configuration
When configuring this benefit at employee level, within the current version of the BIK module, Benefit Start and Benefit Stop dates are used to calculate prorated values. While this logic is appropriate for ongoing benefits, it does not automatically align with the treatment of one-off events.
Enter the full value of the payment as the benefit value
To avoid incorrect pro-rating, set the Benefit Start and Benefit Stop dates to the full tax year
With this configuration, even if the employee leaves, the full taxable value of the payment will be taxed correctly.
Time-Based or Recurring Benefits
In less common cases, an expense may relate to a defined period. For example, where private travel arrangements span multiple months.
Company-Level Configuration
Retain the benefit, or not at all. Just be aware that pro-rating will occur if the employee is made a leaver, unless the benefit is retained until the end of the tax year
Employee-Level Configuration
Enter the full value of the payment as the benefit value
Set Benefit Start and Benefit Stop dates to reflect the period the employee is entitled to the benefit
The module will prorate the cash equivalent based on the benefit value and on the number of days the benefit is held for
Note: If the benefit is time-based but a prorated benefit value is entered instead (Benefit providers may already provide a prorated amount), then determine a full tax-year benefit value, or treat it as a one-off event as above.
Ongoing Enhancements
The current release of the BIK module fully supports compliant processing of this benefit type for income tax purposes. While certain behaviours, such as date-based prorating, require deliberate configuration for this benefit type, the correct legislative outcome can be achieved through the setup approach outlined above.
Employers can therefore operate this benefit accurately by applying the prescribed configuration.
Future enhancement phases will further refine benefit-specific behaviour to reduce manual intervention, increase automation, and more closely reflect the distinct legislative treatment of one-off benefit events such as Assets Transferred.
Event Type: Non-business entertainment - employer arranges and pays
More Info: GOV.UK: Expenses and benefits: entertainment
This event type applies where the employer organises and pays directly for entertainment that is not wholly for business purposes and provides a personal benefit to the employee. Examples include social events, hospitality, or leisure activities arranged by the employer that fall outside exemption rules.
Because the employer arranges and settles the cost, the benefit is typically treated as a benefit in kind rather than earnings. Income Tax is therefore payrolled across the tax year, and employer-only Class 1A National Insurance applies and is reported at year-end.
Income Tax Liability |
National Insurance Liability |
Payrolled, across the Tax Year |
Class 1A (Employer Only), P11D(b) |
Working out the Taxable Amount
The taxable value is the full cost of the entertainment paid by the employer, minus any amount paid back (made good) by the employee.
If the event includes both business and private elements, only the portion relating to the employee’s personal benefit should be included.
For Example:
An employer organises a hospitality event costing £1,200 for an employee and their guest. The employee contributes £200 toward the cost:
£1,200
(Cost to the Employer)
minus
£200
(Amount paid by the employee, as a contribution toward the taxable benefit)
equals
£1,000
£1,000 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.
£1,000 is recorded as the benefit value, and Income Tax is payrolled across the tax year. Class 1A National Insurance is due at year-end.
Event Type: Non-business entertainment - employee arranges, employer pays
More Info: GOV.UK: Expenses and benefits: entertainment
This event type applies when the employee selects or arranges the entertainment, but the employer pays the supplier directly. Examples might include a team social activity or a personal event chosen by the employee but settled by the company.
Because the employee is directing the benefit and the employer provides the payment, Income Tax is payrolled across the tax year, and Class 1 National Insurance applies for both employer and employee, due in the next payroll period.
Income Tax Liability |
National Insurance Liability |
Payrolled, across the Tax Year |
Class 1 (Employer & Employee), due in full in the next pay period |
Because this event type attracts Class 1 National Insurance, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.
Working out the Taxable Amount
The taxable value is the cost of the entertainment paid by the employer, minus any amount paid back (made good) by the employee.
Only the portion that represents a personal benefit to the employee should be included.
For Example:
An employee arranges a social event costing £1,500. They contribute £300 toward the cost, with the employer paying the remainder directly to the supplier.
£1,500
(Cost to the Employer)
minus
£300
(Amount paid by the employee, as a contribution toward the taxable benefit)
equals
£1,200
£1,200 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.
The £1,200 cash equivalent is payrolled for Income Tax across the tax year, and Class 1 NIC is calculated and applied in the next payroll period for both the employer and the employee.
Event Type: Non-business entertainment - employee arranges and pays, employer reimburses
More Info: GOV.UK: Expenses and benefits: entertainment
This event type applies when the employee pays for entertainment themselves and is later reimbursed by the employer. Because the employee receives cash directly, Income Tax is applied immediately and Class 1 National Insurance is due for both employer and employee in the next payroll period.
Income Tax Liability |
National Insurance Liability |
Immediate, due in full in the next pay period |
Class 1 (Employer & Employee), due in full in the next pay period |
Because this event type attracts Class 1 National Insurance, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.
Working out the Taxable Amount
The taxable value is the cost of the entertainment paid by the employer, minus any amount paid back (made good) by the employee.
Only the portion that represents a personal benefit to the employee should be included.
For Example:
An employee arranges a social event costing £800 and is reimbursed £800 by the employer. They had contributed £100 toward the event.
£800
(Cost to the Employer)
minus
£100
(Amount paid by the employee, as a contribution toward the taxable benefit)
equals
£700
£700 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.
The £700 is immediately subject to Income Tax and Class 1 NIC for both employer and employee in the next payroll period.
Event Type: Private Travel - employer arranges and pays
More Info: GOV.UK: Expenses and benefits: travel and subsistence
This event type applies where the employer arranges and pays for private travel on behalf of the employee. Examples include personal travel booked directly by the employer, such as flights, accommodation, or other travel-related costs for non-business purposes.
Because the employer pays directly, Income Tax is payrolled across the tax year, and Class 1A National Insurance is due and reported via P11D(b) at year-end.
Income Tax Liability |
National Insurance Liability |
Payrolled, across the Tax Year |
Class 1A (Employer Only), P11D(b) |
Working out the Taxable Amount
The taxable value is the cost of travel paid by the employer, minus any contribution made by the employee toward the travel.
Only the portion that represents a personal or private benefit to the employee is included.
For example:
An employer books a £1,000 flight for an employee’s private trip. The employee contributes £200 toward the cost.
£1,000
(Cost to the Employer)
minus
£200
(Amount paid by the employee, as a contribution toward the taxable benefit)
equals
£800
£800 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.
The £800 is recorded in the BIK module, with Income Tax payrolled across the tax year and Class 1A NIC due at year-end via P11D(b).
Event Type: Private Travel - employee arranges and employer pays supplier directly
More Info: GOV.UK: Expenses and benefits: travel and subsistence
This event type applies when the employee selects or books private travel themselves, but the employer pays the supplier directly. Because the employee directs the travel, Income Tax is payrolled across the tax year, and Class 1 National Insurance applies for both employer and employee, due in the next payroll period.
Income Tax Liability |
National Insurance Liability |
Payrolled, across the Tax Year |
Class 1 (Employer & Employee), due in full in the next pay period |
Because this event type attracts Class 1 National Insurance, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.
Working out the Taxable Amount
The taxable value is the cost of travel paid by the employer, minus any contribution made by the employee toward the travel.
Only the portion that represents a personal or private benefit to the employee is included.
For example:
An employee books a £1,200 private trip, with the employer paying the supplier directly. The employee contributes £200 toward the trip.
£1,200
(Cost to the Employer)
minus
£200
(Amount paid by the employee, as a contribution toward the taxable benefit)
equals
£1000
£1000 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.
The £100 is recorded in the BIK module, with Income Tax payrolled across the tax year and Class 1 NIC is applied in the next payroll period for both the employer and employee.
Event Type: Private Travel - employee arranges and pays, employer reimburses
More Info: GOV.UK: Expenses and benefits: travel and subsistence
This event type applies when the employee pays for private travel themselves and is subsequently reimbursed by the employer. Because the employee receives cash directly, Income Tax is applied immediately, and Class 1 National Insurance is due for both employer and employee in the next payroll period.
Income Tax Liability |
National Insurance Liability |
Immediate, due in full in the next pay period |
Class 1 (Employer & Employee), due in full in the next pay period |
Because this event type attracts Class 1 National Insurance, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.
Working out the Taxable Amount
The taxable value is the cost of travel paid by the employee and reimbursed by the employer, minus any contribution made by the employee toward the travel.
Only the portion that represents a personal or private benefit to the employee is included.
For Example:
An employee books a £600 private trip and is reimbursed by the employer. They contributed £100 toward the cost.
£600
(Cost to the Employee, Reimbursed by the Employer)
minus
£100
(Amount paid by the employee, as a contribution toward the taxable benefit)
equals
£500
£500 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.
The £500 is immediately subject to Income Tax and Class 1 NIC for both employer and employee in the next payroll period.
Event Type: Business Travel - reimbursed more than the necessary cost
More Info: GOV.UK: Expenses and benefits: travel and subsistence
This event type applies when an employee incurs business travel expenses that are reimbursed by the employer above the amount necessary for business purposes. Examples include excess claims for mileage, flights, or accommodation that exceed what is required for the business trip.
Unlike Private Travel, which is entirely personal in nature, this relates to travel undertaken for business purposes, where only the excess portion becomes taxable.
Because the excess is cash paid to the employee, Income Tax is applied immediately, and Class 1 National Insurance is due for both employer and employee in the next payroll period.
Income Tax Liability |
National Insurance Liability |
Immediate, due in full in the next pay period |
Class 1 (Employer & Employee), due in full in the next pay period |
Because this event type attracts Class 1 National Insurance, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.
Working out the Taxable Amount
The taxable value is the amount reimbursed that exceeds the necessary business cost, minus any employee contribution toward the excess.
For Example:
An employee incurs £1,000 in travel expenses for a business trip. HMRC-approved necessary costs are £700. The employer reimburses the full £1,000.
£1,000
(Cost to the Employee, Reimbursed by the Employer)
minus
£700
(HMRC-Approved necessary costs, or "actual" costs)
equals
£300
(Excess between the amount reimbursed and actual cost)
£300 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.
The £300 is immediately subject to Income Tax and Class 1 NIC for both the employer and the employee in the next payroll period.
Event Type: Non-Qualifying Relocation - employer arranges and pays
More Info: GOV.UK: Expenses and benefits: relocation costs
This event type applies where the employer arranges and pays for relocation expenses that do not meet the HMRC qualifying criteria. Examples include moving costs for personal convenience, non-essential relocation, or amounts exceeding approved limits.
This differs from Qualifying Relocation Expenses, which can be tax-exempt up to £8,000. Non-qualifying relocation costs are fully taxable as a benefit in kind.
Because the employer pays directly, Income Tax is payrolled across the tax year, and Class 1A National Insurance is due and reported via P11D(b) at year-end.
Income Tax Liability |
National Insurance Liability |
Payrolled, across the Tax Year |
Class 1A (Employer Only), P11D(b) |
Working out the Taxable Amount
The taxable value is the total cost of the relocation expense paid by the employer, minus any contribution made by the employee.
For Example:
An employer arranges and pays £5,000 toward an employee’s relocation that does not meet HMRC qualifying criteria. The employee contributes £1,000 toward the move.
£5000
(Cost to the Employer)
minus
£1000
(Amount paid by the employee, as a contribution toward the taxable benefit)
equals
£4000
£4000 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.
The £4,000 is recorded in the BIK module, with Income Tax payrolled across the tax year and Class 1A NIC due at year-end via P11D(b).
Event Type: Non-Qualifying Relocation - employee arranges and employer pays supplier directly
More Info: GOV.UK: Expenses and benefits: relocation costs
This event type applies when the employee arranges the relocation themselves, but the employer pays the supplier directly for non-qualifying relocation costs.
Unlike Qualifying Relocation Expenses, which can be tax-exempt up to £8,000, non-qualifying relocation costs are fully taxable because they fall outside HMRC-approved limits or conditions.
Because the employee directs the payment, Income Tax is payrolled across the tax year, and Class 1 National Insurance applies for both employer and employee, due in the next payroll period.
Income Tax Liability |
National Insurance Liability |
Payrolled, across the Tax Year |
Class 1 (Employer & Employee), due in full in the next pay period |
Because this event type attracts Class 1 National Insurance, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.
Working out the Taxable Amount
The taxable value is the total cost of the relocation expense paid by the employer, minus any contribution made by the employee.
For Example:
An employee arranges a move costing £6,000, which is non-qualifying. The employer pays the supplier directly. The employee contributes £500 toward the move.
£6000
(Cost to the Employer)
minus
£500
(Amount paid by the employee, as a contribution toward the taxable benefit)
equals
£5500
£5500 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.
The £5,500 cash equivalent is payrolled for Income Tax across the tax year, and Class 1 NIC is applied in the next payroll period for both employer and employee.
Event Type: Non-Qualifying Relocation - employee arranges and pays, employer reimburses
More Info: GOV.UK: Expenses and benefits: relocation costs
This event type applies when the employee pays for relocation costs themselves and is subsequently reimbursed by the employer, where the relocation is non-qualifying under HMRC rules.
Unlike Qualifying Relocation Expenses, which can be tax-exempt up to £8,000, non-qualifying costs are fully taxable. Because cash is reimbursed directly to the employee, Income Tax is applied immediately, and Class 1 National Insurance is due for both employer and employee in the next payroll period.
Income Tax Liability |
National Insurance Liability |
Immediate, due in full in the next pay period |
Class 1 (Employer & Employee), due in full in the next pay period |
Because this event type attracts Class 1 National Insurance, please read the National Insurance and Income Tax Handling for Payrolled Benefits article.
Working out the Taxable Amount
The taxable value is the total cost of the relocation expense paid by the employer, minus any contribution made by the employee.
For Example:
An employee arranges and pays £4,500 for a non-qualifying relocation and is reimbursed by the employer. The employee contributes £500 toward the move.
£4500
(Cost to the Employee, Reimbursed by the Employer)
minus
£500
(Amount paid by the employee, as a contribution toward the taxable benefit)
equals
£4000
£4000 is the taxable amount (or Cash Equivalent) to apply to the employee as a benefit.
The £4,000 is immediately subject to Income Tax and Class 1 NIC for both the employer and employee in the next payroll period.
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