Organising Employee Relocation: What Tax Deductions Are You Entitled To

Posted on 19/09/2016

If you are the owner of a company in the UK and you need to help organise employee relocation, then you will need to be aware of the tax deductions your company will be entitled to. To do that, however, you will need to check a few things first. Let’s get started:

• Relocation overview

You have specific reporting, tax and national insurance obligations that will contribute to your relocation points for your employees. These can include a number of things, namely buying and selling homes, moving house, purchasing items for their new home, helping them deal with loan issues, as well as other employee relocation expenses they may be dealing with in the long run. When it comes down to it these may vary from employee to employee before they hire a man with van and move in, but in the end they remain the same, more or less.

• Things that don’t need reporting

In some cases relocation costs up to £8,000 will be exempt from paying tax and reporting as well as national insurance. These qualifying costs may include the costs connected to buying and selling a home, as well as any connected house removal costs, the purchase of items for a new home and any help you provide with loans. There are also qualifying costs in the form of new employees moving in the area and starting a job at your company. Whether they do this via a man and van company or in any other way doesn’t matter, it qualifies. The same goes for whenever existing employees are changing their workplace within the company. Costs paid before the tax year has ended after a move also qualify, as well as when the new home of your employee is fairly close to their workplace when the old home wasn’t. For any qualifying costs that fall over the abovementioned sum, you will need to report and pay your tax and national insurance however.

• Bridging loans

If you want to qualify for a bridging loan, then you will need to meet specific conditions. The employees or even members of their family have to sell their home and purchase a new one instead. They must also need to bridge the gap between purchasing said new home and getting any money from the sale of their previous one. You also have to use said loan only on the new home purchase or paying off any loans for the old one before they get their man and van to relocate them. The new home value also cannot be more than the market value of the old home once the new home is purchased and they move in with a man with a van.

• What needs to be reported and paid

You will not have to report or deduct any of the qualifying costs that lead up to £8,000. When it comes down to anything above that sum however, you will need to report on a P11D form, as well as pay the Class 21A National Insurance for any amounts over said sum. Any non-qualifying benefits that you arrange and pay the supplier directly means you will also need to report on a P11D form as well as paying national insurance.

The same goes for non-qualifying benefits that the employee arranges, but you will need to once again pay the supplier directly, filing in a P11D and then following that up with adding the costs of employee earnings and deduction of Class 1 National Insurance without the PAYE tax through the payroll.

Non qualifying expenses or benefits reimbursed by you for your employee costs also fall under the same category, such as expenses or benefits where you pay the employee back their costs. When these count as earnings you will need to add them to your employee’s overall earnings, then deduct and take care of the PAYE tax and the national insurance via payroll.

• Working out the value

The qualifying costs fall under the £8,000 mark. For any other costs you will need to calculate the tax or national insurance based on the full costs of the benefit provided. You will also need to use the HM Revenue and Customs P11D working sheet to help work out the relocation benefits.