PAYE Employment Expenses – HMRC will Require Evidence from Taxpayers
19/10/2024 - 7 minutes readHMRC will require evidence from taxpayers who wish to claim PAYE Employment expenses as per HMRC’s new approach announced earlier this week.
HMRC will require evidence from taxpayers if they are claiming income tax relief for allowable expenses and taxpayers will need to use a P87 form and provide supporting evidence to prove their eligibility before HMRC progress the claim.
HMRC’s new approach from 14th Oct 2024
On 10 June, HMRC suspended processing some claims for tax relief on employment expenses while they considered the best way to manage this risk and they introduced the new approach from 14th October 2024 onwards.
This approach is built on stopping the ineligible payments going out in the first place through increased checks and changes to processes. This includes educating customers on the consequences of ineligible claims and disrupting the business model of firms that submit non-compliant claims.
HMRC are currently writing to claimants (including agents), whose claims have not been processed since the 10 June, to inform them of this new requirement and to ask them to provide evidence to support their claim.
When customers send HMRC evidence for P87 work expense claims, HMRC will check all evidence and confirm to customers whether they are entitled to tax relief.
HMRC will require evidence from taxpayers submitting PAYE expense claims
From this date, customers will no longer be able to submit a PAYE employment expense claim using the digital form or make a new claim over the phone. However, customers will continue to be able to use GOV.UK to check they’re eligible to claim employment expenses and to find the P87 form.
HMRC expect that customers making genuine claims will be able to provide this information and submit it to them, alongside the printed P87 form, in the post.
Tax agents already regularly submit P87 claims via the post, so HMRC do not believe this will cause agents any difficulties.
However, HMRC do recognise that an online claim route is more convenient for customers, which is why they are working at pace to reinstate the digital process as soon as possible.
For ‘uniform, work clothing and tool’ expenses, customers will be able to claim these online from 31 October 2024. For all other expenses, HMRC expect a digital claim route to be available by April 2025.
HMRC will keep this updated process under review and will provide a further update in the future.
What are the requirements?
Customers must tell HMRC which employment they incurred the expense for, as well as whether their employer reimbursed any of the cost, and if they did, show evidence of how much.
They must also have paid tax in the year that they spent money on the expense that they’re claiming. How much they can claim depends on the rate that they pay tax.
For example, if they spent £60 and pay tax at a rate of 20%, the tax relief they can claim is £12.
Examples of some of the types of evidence they would expect claimants to provide
Subscriptions to professional bodies
Copies of receipts, or other evidence, that shows how much was paid for each professional subscription claimed.
Mileage allowance
A copy of a mileage log for each employment. This should include the reason for every journey and the postcodes for the start and finishing points.
Hotel and meal expenses (subsistence)
Copies of receipts that include the date of a stay or a meal, and the name of the hotel or restaurant.
Expenses for working from home
Evidence that the claimant must work from home, such as a copy of their employment contract. If it’s not stated in the employment contract, HMRC need something else that explicitly states they must work from home. If it’s the claimant’s choice to work from home, they can’t claim this expense.
No evidence is required for ‘working from home’ expense claims for tax years 2020 to 2021 and 2021 to 2022 provided that:
- – employees were instructed to work from home (due to UK government Covid restrictions)
- – they are submitted within the time limits
Other expenses
A full list of the other expenses that they’ve claimed and the employments they’re for. We also need copies of receipts or other evidence that show the name of the item and that the claimant paid for it.
Uniform, work clothing and tool expenses (also known as Flat Rate Expenses)
HMRC will not require evidence for these Flat Rate Expenses (FRE) claims. However, customers are still responsible for making sure they are eligible to claim FRE.
HMRC will still carry out risking to identify customers who may not be eligible to claim FRE.
From 31 October 2024, customers claiming these FRE expenses will be able to their digital claim route. All other types of expenses which require evidence will need to be submitted to HMRC using the post.
Where to send evidence
HMRC will be asking customers to send evidence to:
Pay As You Earn and Self Assessment
HM Revenue and Customs
BX9 1AS
How can MCL Accountants help you?
Contact MCL Accountants on 01702 593 029 if you would like us to assist with your queries on Employment expenses whereby HMRC will require evidence from taxpayers or if you need any assistance with the preparation and submission of your business accounts or self-assessment tax returns to HMRC.
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Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.
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