Staff expenses paid / payroll query

PaulaS

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.
Thanks

Gem7321

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

Surely it is therefore a non-taxable expense?

MarieNoelle

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

ok thanks