Non-reimbursed employee expenses costing the Exchequer
Many employees will incur expenses during the course of the performance of their job, in particular business travel. If their employer does not pay for an expense directly or reimburse it, then it is left to the employee to claim tax relief on the cost of the expense directly from HMRC, provided the expense is incurred ‘wholly, exclusively and necessarily in the performances of the duties of the employment’. Incidentally, this rule was introduced in 1853 and included the expense of keeping and maintaining a horse for work purposes!
Where the employer meets the cost of an allowable expqdense, then there are no income tax or NIC implications. The administration of the tax relief for expenses paid for or reimbursed by the employer was simplified from April 2016 with the introduction of an exemption for paid or reimbursed expenses. Under this exemption, qualifying expenses can be paid by employers free of tax and without the need for an employer to apply to HMRC for a dispensation. Such expenses do not need to be returned to HMRC at the end of the tax year on form P11D, and employees do not need to make a claim to HMRC for a corresponding tax relief.
Cost of providing tax relief to employee expenses is significant
The cost of providing tax relief to employee expenses is significant and end of year claims made by employees has risen by 25% between 2009/10 – 2014/15. These claims cost the Exchequer £800 million per year. The government wants to understand more about why claims for non-reimbursed expenses have increased and also to ensure that the rules are effective.
In this year’s Spring Budget, the government confirmed the Autumn Statement announcement that a call for evidence would be published to better understand the use of the income tax relief for employees’ business expenses, with the main objectives being:
- if the current rules or their administration can be clearer and simpler
- whether the tax rules for expenses are fit for purpose in the modern economy
- why the cost to the Exchequer of the tax relief for expenses which are not reimbursed has increased
The call for evidence, which poses 17 questions contained in three sections, is seeking views on:
- current employer practise on employee expenses
- current tax rules on employee expenses
- the future of employee expenses
Whilst there are no plans to remove the relief on employee expenses, the government will use the information gathered from this call for evidence to shape future policy development.
The full document can be found by visiting https://www.gov.uk/government/consultations/taxation-of-employee-expenses-call-for-evidence/taxation-of-employee-expenses-call-for-evidence.
Closing date for evidence is 10th July 2017.
Advantages of a package with QAccounting are many; have you tried the Expenses App which ensures easily submitted expenses?
Contact us to find out more
More Posts
Can an accountant help your start-up grow?
As any business owner will tell you, launching a company isn’t exactly the easy option. But it’ll take something else, too. The support of a good accountant. If you’re a start-up founder (or still in the planning stages) and wondering if it’s time you got an accountant, look no further. This article will tell you what you need to know.
Why do I need a specialist property accountant?
Finances in property and real estate can be seriously complicated, even to a seasoned accountant. That’s why we recommend you seek the help of a specialist property accountant to keep everything straight. Let’s look at some of the basics involved.
How to choose the right type of accountant for your business
The accountant/client relationship is an important one as this is the person who’ll be by your side as you navigate the choppy waters of business ownership, so you’ll need to choose wisely. Here are eight pointers on how to choose the right type of accountant for your business.