Background
Individuals have been able to submit a digital form or telephone HM Revenue & Customs (HMRC) in order to claim tax relief for employment expenses not reimbursed by their employer, such as professional subscriptions, for some time now. The tax relief is provided through PAYE on amounts claimed of up to £2,500. Historically employees have not needed to provide evidence of these expenses unless specifically requested by HMRC. However, HMRC are now tightening the process and adopting a ‘check first, pay later’ approach to employment expenses after the current way of working has resulted in many ineligible claims. HMRC suspended the processing of some claims on 10 June 2024 while they considered the best way to proceed.
HMRC’s main target so far has been high-volume agents. Previously, tax refund companies would use customised claim forms or letters which would include a deed of assignment, where the tax refunds would divert the repayment directly to the agent. This had left many taxpayers out of pocket.
The new approach will include increased checks alongside the changes to the processes.
Detail
From today, 14 October 2024, anybody wanting to claim employment expenses will need to use a paper P87 form and provide supporting evidence to prove their eligibility. Employees incurring job-related expenses of up to £2,500 per tax year which are not fully reimbursed by their employer will need to provide the information alongside the printed P87 form in the post.
The claimant will be required to state the nature of the expense and whether the employer reimbursed any of the cost, along with providing evidence of the claim. In addition, the claimant must have paid tax in the year the expense claim relates to. HMRC requires evidence of subscriptions to professional bodies with copies of receipts, a copy of a mileage log including the reason for every trip with the postcodes for the start and finishing points. Receipts must be provided for hotel and meal expenses with the name of the hotel or restaurant. With regard to expenses incurred when working from home, HMRC requires a copy of the employment contract stating that the employee is required to work from home. The relief is not available for those who simply choose to work remotely.
HMRC have said they are “working at a pace” to reinstate the digital process. Those looking to claim for uniform, work clothing and tool expenses will only have to wait until 31 October 2024 for a digital route to claim. HMRC expects all remaining digital claim routes to be available by April 2025. HMRC is currently writing to claimants, whose claims have not been processed since 10 June 2024 when the system was halted, to inform them of this new requirement and to ask them to provide evidence to support their claim.
One area of exception is flat rate expense claims. Here the onus is on the taxpayer to make sure they are eligible to claim flat rate expenses but they will not have to provide evidence of the expenditure. HMRC will carry out risk assessments to identify ineligible claimants.
As part of the crackdown, HMRC has also begun compliance work looking at employment expenses submitted via self-assessment returns. This will include checks on the eligibility of claims, with possible requests for further evidence.
P87 forms and evidence must be sent by post to:
Pay As You Earn and Self-Assessment
HM Revenue and Customs
BX9 1AS
If you would like more information on making a claim for employment expenses, please speak to our Tax Director, Jenny Marks.
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