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Long story short: I was travelling abroad with work and we ended up with a large bar tab (over £1500 - don't ask). The company credit card was declined so I paid for it on my personal card.

My employer has been paying chunks directly off of this card for the last couple of months as we agreed to pay half of the balance each. Had the company card gone through, I would have paid the half to the company directly, along with some explaining!

I am wondering how this would be seen in terms of undeclared income. I know how it looks and could be perceived, but if it were myself and a friend splitting the bill, I wouldn't see it as income. It is unfortunate he is paying it from a business account though.

Hope this is clear - I will likely check with an accountant but am interested in your opinions on the matter.

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If this is a business expense - then this is what is called reimbursement. Reimbursement is usually not considered as income since it is money paid back to you for an expense you covered for your employer with your after-tax money.

However, for reimbursement to be considered properly executed, from income tax stand point, there are some requirements. I'm not familiar with the UK income tax law specifics, but I reason the requirements would not differ much from places I'm familiar with: before an expense is reimbursed to you, you should usually do this:

  1. Show that the expense is a valid business expense for the employer benefit and by the employer's request.

  2. Submit the receipt for reimbursement and follow the employer's procedure on its approval.

When income tax agent looks at your data, he actually will ask about the £1500 tab. You and you'll employer will have to do some explaining about the business activity that caused it. If the revenue agent is not satisfied, the £750 that is paid to you will be declared as your income.

If the required procedures for proper reimbursement were not followed - the £750 may be declared as your income regardless of the business need. Have your employer verify it with his tax accountant.

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    As far as I know this is correct for the UK as well. For what it's worth, I don't have a company credit card so if I have any expenses they go straight on my personal card and my employs reimburses me directly (and this has always been fine). – Vicky Apr 4 '14 at 8:57

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