Work expenses unlikely to remain stationary

Whilst the government has no plans to remove the relief on employee expenses, the start of a formal consultation usually leads to change and tinkering with the subject matter.

Many employees incur business expenses performing their job and then seek reimbursement from their employer for any costs they have paid personally, such as the cost of a train ticket to attend a training event.

However, there are a range of expenses which employees may claim direct from HMRC such as:

• Fees and subscriptions to professional bodies.
• Purchase of protective clothing.
• Laundry of uniform costs.
• Household expenses where an employee’s home is a workplace.
• Business travel to a destination other than the normal, permanent workplace.

Claims for amounts up to £2,500 can be made through an individual’s Personal Tax Account or the completion of a form P87. Claims in excess of £2,500 can be made by completing a self-assessment tax return.

Although HM Treasury has not explicitly said it wants to reduce the cost of claims to the Exchequer, that is clearly one of the motives behind the consultation. Yet the main objectives are claimed to be:

• To see if the rules on employee expenses could be clearer and simpler.
• To see whether the rules for expenses are fit for purpose in the modern economy.
• To establish why the cost to the Exchequer for expenses which are not reimbursed has increased.

HMRC has a long held suspicion of what it calls ‘High Volume Agents’ who submit repayment claims on behalf of the self-employed and employees.
Over the last few years, HMRC has focused on agents who submit tax returns on behalf of subcontractor clients. This consultation signals a shift in emphasis to employee expenses.

Now may well be an opportune time for HMRC to pause and consider a far more fundamental approach, including behavioural and economic objectives, alongside a closer examination of labour force surveys regularly conducted by the ONS.