Income Tax (Earnings and Pensions) Act 2003 section 289B

Approval to pay or reimburse expenses at a flat rate

Section 289B allows employers (or other persons) to apply to HMRC for approval to pay or reimburse employee expenses at a flat rate, rather than reimbursing actual amounts, provided the flat rate is a reasonable estimate of the expenses actually incurred.

• An applicant can request HMRC approval to reimburse employees' expenses at a proposed flat rate, and an HMRC officer may approve it if satisfied the rate reasonably estimates actual costs incurred.
• Approval is communicated through an approval notice which must specify the approved rate, its start date (no earlier than the date the notice is given), its end date (no more than five years from the start), and the type of expenses covered.
• The approval notice may also include conditions that the applicant must comply with in order for the approval to remain valid.
• Applications must be submitted in the form and manner specified by HMRC and must contain all information HMRC requires.