HMRC are implementing new evidence requirements from 14 October 2024 for standalone claims for employment expenses. HMRC have identified a growing tax risk from ineligible claims.
Where employers do not reimburse expenses incurred by an employee, the individual can Claim Income Tax relief through PAYE for allowable expenses up to £2,500. Having recognised the issue, HMRC suspended processing some claims on 10 June 2024 while they considered how to manage the risk.
From 14 October 2024, individuals wishing to make claims are required to use form P87 and provide supporting evidence before their claim will be progressed.
HMRC see this as a process of educating and preventing ineligible claims being processed prematurely. Interestingly, they say they are "disrupting the business model of firms that submit non-compliant claims" which suggests a degree of coordination has been detected. Managed Service Companies (MSC) and 'high volume' repayment agents would seem to be the obvious targets.
Individuals whose claims have not been processed since 10 June will be advised they must comply with the new requirement.
From 14 October, neither the digital form nor a new claim over the phone will be accepted. Claims must be submitted by post for now, but HMRC say they are "working at pace to reinstate the digital process". Evidence must be submitted to: Pay As You Earn and Self Assessment, HM Revenue and Customs BX9 1AS.
Employees who submit claims via Self Assessment returns can continue but HMRC has separately begun a compliance project concerning them.
Evidence requirements:
- Subscriptions to professional bodies: copies of receipts or other evidence showing how much was paid for the amounts claimed.
- Mileage allowance: a copy of a mileage log for each employment including the reason for the jouney and the postcodes for the start and finish points.
- Hotel and meal expenses (subsistence): copies of receipts showing the date of a stay or meal and the name of the establishment.
- Expenses for working from home: evidence that the claimant has a formal agreement to work from home such as a copy of their employment contract. If the position is not clear from the contract, something else making the requirement formal must be provided.
- Uniform, work clothing and tool expenses (also known as Flat Rate Expenses - FRE): evidence is not required for FRE claims but claimants must ensure they are eligible. From 31 October 2024, claimants for these expenses will be able to use the digital claim route.
- Other expenses: a full list of these expenses and the related employment together with copies of receipts or other evidence showing the name of the item and confirmation the claimant paid for it.
Useful guides on this topic
Annual expenses for employees: How to claim
A guide to explains the different ways employees can claim tax relief for the employment expenses they incur as part of their jobs.
Accommodation: With travel or temporary workplaces
What cash allowances can be provided for business travel? What qualifies as business travel? What tax relief is available for accommodation?
Travel (employer's guide)
How do employers apply the tax rules to travel costs? What is available for subsistence costs? What are the rules on home-to-work travel?
Subsistence (summary for employees)
Can employees claim tax relief for subsistence? How do you make a claim?
Subsistence (employer's guide)
Subsistence is the tax term for food and drink. What can be claimed? What are the rules for employer intermediaries? How do claims affect VAT, National Insurance Contributions (NICs) and Income Tax?
Working from home (employees)
What expenses can employees claim for homeworking? Are the rules the same for the self-employed? How do you make a claim?
External link
HMRC issue briefing: Evidence required to claim PAYE (P87) employment expenses
