Date of publication: November 2018
You do not need to report or deduct anything for qualifying costs up to £8,000. For any qualifying costs over £8,000 you must report and pay class 1A National Insurance.
There is a partial exemption for Income Tax, National Insurance and reporting requirements if you provide an employee with relocation expenses or benefits that meet the four qualifying conditions set out below. These are known as 'qualifying' expenses and benefits.
First, the employee's reason for relocation must be one of the following:
Second, the expenses and benefits must fall into one of the six categories below:
Third, there is a time limit. To qualify, the expenses must be incurred or the benefits must be provided before the end of the tax year after the one in which the employee's circumstances changed (as outlined in the first step of this list).
Fourth, the employee's new residence must be within reasonable daily travelling distance of their new normal place of work, and their old residence must not be within reasonable daily travelling distance of the new normal place of work.
The treatment of non-qualifying costs varies depending on the precise arrangements involved. Generally you will be required to treat the non-qualifying costs as other earnings and treat them accordingly.
A relocation expense or benefit is 'non-qualifying' if it doesn't meet the four qualifying conditions.
Examples of non-qualifying expenses and benefits include:
Disclaimer: This note does not contain a full statement of the law and it does not constitute legal advice. Please contact us if you have any questions about the information set out above.
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