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Legal fees paid by a company for an employee.

An employee is facing legal proceedings (work related) for which he states he is innocent. As his company also believe in his innocence, they are funding his legal fees. I assume that these fees are required to be shown on his P11D?

Some of the invoices are made out to the company and some to the individual.
 
I assume if he wins the legal fees are then repaid to his company so does this effect things.

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07th Jul 2011 11:27

BIK

See here re Rendell v Went:

http://www.hmrc.gov.uk/manuals/eimanual/eim21003.htm

The company's motives in paying for the defence may be work-related but there is still a benefit is to the employee personally (as he would otherwise have had to defend himself).

To the extent that the company pays fees which are contractually the employee's to pay, this will come under the settlement of pecuniary liability rules.

Interesting re what happens if he wins and the costs are paid by the state - which could occur after the P11D has been submitted/the payment has been taxed. You could repair the return to exclude the cost of the fees (but NIC would have been paid). I suppose you could treat the fees paid on his behalf (i.e. where the employee has the contract with the lawyers) as an interest-free loan until the case is over. But not re the fees contracted for by the employer as the employee wouldn't have a liability to pay them in any case so, legally, they couldn't be recovered from him.

Cathy

[email protected]

 

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07th Jul 2011 11:34

I agree

I was also thinking down the company loan route assuming he is confident in winning and getting the costs back.

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