The process for employees claiming job related expenses which are not reimbursed by the employer is changing. Following a recent HMRC announcement on employment expenses, from 14 October only postal claims will be allowed, and HMRC will require evidence of the expense to be submitted along with the claim.
As covered in Employer Focus last year, employees have previously been able to claim tax relief for job related expenses online, by post or by phone. The move to a postal-only process may seem a backward step, but is an attempt by HMRC to combat fraudulent claims. In short, they are adopting a ‘check first, pay later’ approach, rather than issuing the repayment and (potentially) checking its validity afterwards.
How should employees claim expenses?
Employees incurring job-related expenses of up to £2,500 per tax year which are not fully reimbursed by their employer will need to:
- download and complete a ‘P87’ expense claim form,
- attach relevant evidence of their expense claim, and
- post their completed claim to HMRC.
The evidence required will depend on the expenses incurred, but some common examples include:
- Business mileage – detailed mileage logs will need to be submitted, including the reason for each journey and the postcodes where it started and ended.
- Travel and subsistence – copies of receipts and invoices, including the name of hotels/restaurants etc and the date incurred.
- Working from home costs – evidence from an employment contract stating that the employee has to work from home will be needed, along with any calculations justifying the claim if it is based on actual costs rather than the default homeworking allowance of £26/month. No claims are possible where an employee chooses to work from home.
HMRC have published further examples of evidence required for different types of employment expenses, along with guidance on employment expenses that may be eligible for tax relief.
No evidence is needed where Flat Rate Expenses are claimed. These are, usually small, fixed amounts of tax relief available for certain jobs to cover the costs of uniforms, work clothes, laundry and tools.
The process for claiming tax relief via a Self-Assessment tax return has not changed – employees who complete a Self-Assessment return will need to retain adequate records of the expenses incurred, but will not need to provide any evidence when filing their return.
What about pending claims?
HMRC paused processing of employment related expense claims on 10 June while they reviewed their procedures. Anyone who has already submitted a claim which has not been processed should receive a letter from HMRC asking them to provide evidence of the expense before the claim can be processed.
Paperless options
Given HMRC’s drive to greater use of digital services, the use of a postal claim service will only be temporary. HMRC aim to offer a digital route to claim Flat Rate Expenses from 31 October 2024, with plans to expand the digital offering to general employment related expenses from April 2025.
This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.
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