Staff expenses paid / payroll query

PaulaS Just JoinedRegistered Posts: 9
A member of staff (not a director) was asked to work extra hours, and therefore had to cancel his weekend trip. He therefore asked if the company would pay the cancellation fee he incurred. I wrote a cheque to him and posted it on Sage as an expense. My colleague said it should have gone through the payroll as it was a compensation payment. I can find nothing on the internet to say that the expense should have gone through the payroll.
Please could someone advise if I did the wrong thing.


  • Gem7321
    Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    I wouldn't say it was compensation but would be inclined to say that it was a payment of private expenses and therefore count as earnings. You could 'gross up' the amount of the payment so the employee does not suffer.
  • PaulaS
    PaulaS Just Joined Registered Posts: 9
    Surely it is therefore a non-taxable expense?
  • MarieNoelle
    MarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,433
    I would agree with Gem7321. This is not a genuine business expense but the settlement of a personal liability, therefore subject to class 1 NIC and PAYE.
  • PaulaS
    PaulaS Just Joined Registered Posts: 9
    ok thanks
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