Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
Do you need to inform HMRC if you help with relocation costs?
If, as an employer, you help your employees with the costs of relocating, you may be required to report these costs to HMRC. You might have to pay additional PAYE tax and National Insurance as well, depending on the circumstances.
As far as HMRC is concerned, relocation costs include:
- The costs involved with buying or selling a home
- Moving expenses
- The costs of buying certain things for a new home
- Bridging loans, if required
- Other relocation costs (HMRC sometimes calls these ‘non-qualifying costs’ and are treated in a different way to other relocation expenses)
Are there any exemptions?
There are some relocation expenses, up to a limit of £8,000, which are exempt from HMRC reporting requirements and which won’t incur extra tax or National Insurance deductions. HMRC calls these ‘qualifying costs’. Not every relocation expense will be considered to be a qualifying expense even if it is below the £8,000 threshold.
Qualifying costs include the following:
- The costs of buying or selling a home
- Bridging loans
- Moving expenses
- The cost of buying certain items for a home
However, to be classed as qualifying costs, they only count when the following conditions are met:
- You have recruited a new employee and they are moving area to start work for you
- An existing employee is moving their work location within your company
- The employee’s new home is reasonably close to their workplace but their old one wouldn’t be considered to be reasonably close
- These relocation costs are paid before the end of the tax year after the one in which the move occurred.
If the qualifying costs are greater than the £8,000 threshold, you might be expected to report them to HMRC and there could be additional PAYE tax and National Insurance to pay.
For a bridging loan to count as a qualifying cost, the following HMRC conditions must be met:
- Your employee must sell their old home and buy a new one (including when it is a member of the employee’s family who is selling and buying the property instead, rather than the actual employee)
- The bridging loan must be necessary to bridge the gap between buying the new property and getting the proceeds from selling their old home
- It can only be used to buy the new house or to pay off any loans existing on the old home
- The bridging loan can’t be for more than the market value of the old home at the time that the new property is purchased.
What needs to be reported to HMRC and paid?
If the only relocation costs are qualifying costs less than £8,000, you don’t need to report anything to HMRC and there will be no additional tax or National Insurance owing.
For qualifying costs above £8,000, you need to report these on your P11D form and pay Class 1A National Insurance on the amount above £8,000.
For non-qualifying costs which have been directly arranged with a supplier and paid by you, you need to report these on your P11D form and pay Class 1A National Insurance on the cost of the benefit to you.
For non-qualifying relocation costs which are arranged by your employee but you pay for directly to the supplier, you need to report these on your P11D form and then add the value of the costs to your employees other earnings. You will then deduct and pay Class 1 National Insurance on those additional earnings through your payroll. You won’t have to pay any additional PAYE tax though.
For all non-qualifying costs where you reimburse your employee, HMRC will consider these to be earnings. That means you need to add them to your employee’s other earnings and then deduct and pay PAYE tax and Class 1 National Insurance through payroll.
How do you work out the value?
For qualifying costs, the value you need to report to HMRC is the cost of anything above £8,000.
For all other relocation expenses, you need to work out the full cost to yourself of providing the benefit and this is the value you will report to HMRC and calculate the additional National Insurance or PAYE tax to be paid. If you’re not sure how to calculate the cash equivalent of the relocation expense benefit you have provided, you can use HMRC’s P11D working sheet.
How can DSR Tax Claims help?
We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful. Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.