We are going to pay an employee to relocate to another branch. What can we pay and how best to do it without it costing us - or the employee - a lot of money in tax?
The good news is there is a value of up to £8,000 in removal costs that can be reclaimed from or provided by the employer. The bad news is that this is not an open limit and only applies to certain expenses. See HMRC’s Expenses and Benefits tax guide, part four, chapter seven. Also look at appendix seven to see a list of qualifying categories of expenses.
HMRC’s information on NIM06150 - Class 1 NICs: Expenses and allowances: Non-exempt relocation expenses gives a list of non-qualifying expenses that will attract tax and/or NICs.
The relocation costs up to £8,000 that are exempt from reporting and paying tax and National Insurance are called ‘qualifying’ costs. They are listed by HMRC as ‘the costs of buying or selling a home, moving costs, buying certain things for a new home and bridging loans’.
However, these are only qualifying costs when a new employee is moving area to start a job with you, an existing employee is changing their place of work within your organisation and the costs are paid before the end of the tax year after the one in which the move took place and the employee’s new home is reasonably close to the workplace and their old home isn’t.
Expenses and benefits, which qualify for exemption, are grouped into six categories by HMRC:
• Disposal or intended disposal of old residence
• Acquisition or intended acquisition of new residence
• Transporting belongings
• Travelling and subsistence
• Domestic goods for the new residence;
• Bridging loans.
Where a relocation management company is used and the administration fees charged are part of the costs to the employer for the employee’s relocation are qualifying removal benefits, so the administration fee also qualifies for relief.
The employee does not need to sell his or her old home, as long as they change their main residence.
Be aware also that if the move does not take place for any reason, then all the expenses become taxable.
Our payroll expert Jeanette Hibbert looks
at topical UK payroll issues.
We are going to pay an employee to relocate to another branch. What can we pay and how best to do it without it costing us - or the employee - a lot of money in tax?
The good news is there is a value of up to £8,000 in removal costs that can be reclaimed from or provided by the employer. The bad news is that this is not an open limit and only applies to certain expenses. See HMRC’s Expenses and Benefits tax guide, part four, chapter seven. Also look at appendix seven to see a list of qualifying categories of expenses.
HMRC’s information on NIM06150 - Class 1 NICs: Expenses and allowances: Non-exempt relocation expenses gives a list of non-qualifying expenses that will attract tax and/or NICs.
The relocation costs up to £8,000 that are exempt from reporting and paying tax and National Insurance are called ‘qualifying’ costs. They are listed by HMRC as ‘the costs of buying or selling a home, moving costs, buying certain things for a new home and bridging loans’.
However, these are only qualifying costs when a new employee is moving area to start a job with you, an existing employee is changing their place of work within your organisation and the costs are paid before the end of the tax year after the one in which the move took place and the employee’s new home is reasonably close to the workplace and their old home isn’t.
Expenses and benefits, which qualify for exemption, are grouped into six categories by HMRC:
• Disposal or intended disposal of old residence
• Acquisition or intended acquisition of new residence
• Transporting belongings
• Travelling and subsistence
• Domestic goods for the new residence;
• Bridging loans.
Where a relocation management company is used and the administration fees charged are part of the costs to the employer for the employee’s relocation are qualifying removal benefits, so the administration fee also qualifies for relief.
The employee does not need to sell his or her old home, as long as they change their main residence.
Be aware also that if the move does not take place for any reason, then all the expenses become taxable.
Our payroll expert Jeanette Hibbert looks
at topical UK payroll issues.
