diff --git a/src/libs/ReportUtils.ts b/src/libs/ReportUtils.ts
index f6dbc7c255ae..07a15aed874a 100644
--- a/src/libs/ReportUtils.ts
+++ b/src/libs/ReportUtils.ts
@@ -2749,7 +2749,9 @@ function isPayer(
     // If the report belongs to a workspace, verify the user is still a member
     // When a user leaves a workspace, they may no longer have access to the policy data,
     // or the policy.role/employeeList may be stale
-    if (iouReport?.policyID && iouReport.policyID !== CONST.POLICY.ID_FAKE) {
+    // Skip this check for IOU reports (personal 1:1 expenses) since they can inherit a policyID
+    // from the chat report but the payer may not be a member of that workspace
+    if (!isIOUReport(iouReport) && iouReport?.policyID && iouReport.policyID !== CONST.POLICY.ID_FAKE) {
         // No policy data means user likely left the workspace
         if (!policy) {
             return false;
diff --git a/tests/unit/ReportUtilsTest.ts b/tests/unit/ReportUtilsTest.ts
index d1a3f59fcd3c..0b8755f97bc4 100644
--- a/tests/unit/ReportUtilsTest.ts
+++ b/tests/unit/ReportUtilsTest.ts
@@ -25,6 +25,8 @@ import Navigation from '@libs/Navigation/Navigation';
 // eslint-disable-next-line no-restricted-syntax
 import * as PolicyUtils from '@libs/PolicyUtils';
 import {getOriginalMessage, getReportAction, isWhisperAction} from '@libs/ReportActionsUtils';
+// Testing only so it's okay to import computeReportName
+// eslint-disable-next-line no-restricted-imports
 import {buildReportNameFromParticipantNames, computeReportName as computeReportNameOriginal, getGroupChatName, getPolicyExpenseChatName, getReportName} from '@libs/ReportNameUtils';
 import type {OptionData} from '@libs/ReportUtils';
 import {
@@ -6004,6 +6006,24 @@ describe('ReportUtils', () => {
             // User should not be a payer even if role says admin, because they're not in employeeList
             expect(isPayer(currentUserAccountID, currentUserEmail, reportForNonMember, undefined, policyWithoutCurrentUser, false)).toBe(false);
         });
+
+        it('should return true for IOU report manager even when policy is not available', async () => {
+            // Simulate an IOU report that inherited a policyID from the chat report,
+            // but the receiver (payer) does not have access to that workspace policy
+            await Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}sender-workspace`, null);
+
+            const iouReportWithPolicyID: Report = {
+                ...createRandomReport(8, undefined),
+                type: CONST.REPORT.TYPE.IOU,
+                stateNum: CONST.REPORT.STATE_NUM.SUBMITTED,
+                statusNum: CONST.REPORT.STATUS_NUM.SUBMITTED,
+                policyID: 'sender-workspace',
+                managerID: currentUserAccountID,
+            };
+
+            // IOU receiver (payer/manager) should still be able to pay even without access to the policy
+            expect(isPayer(currentUserAccountID, currentUserEmail, iouReportWithPolicyID, undefined, undefined, false)).toBe(true);
+        });
     });
     describe('buildReportNameFromParticipantNames', () => {
         beforeAll(async () => {