Employee expenses consultation

HM Revenue & Customs (HMRC) has extended the deadline for its consultation on the current practise and tax rules on employee expenses and the future of the practice to 10 July.

In this year’s Spring Budget, the Government confirmed that it wanted to better understand the use of income tax relief for employees’ business expenses, including those that are not reimbursed by their employer, such as business phone calls or personal cars used for business purposes.

In particular, HMRC wanted to find out whether the current rules or their administration could be clearer and simpler and whether the tax rules for expenses are ‘fit for purpose’ in the modern economy.

The taxman also wanted to work out why the cost to the Exchequer of the tax relief for expenses that are not reimbursed, which amount to around £800m per year, has increased by 25 per cent between 2009-10 and 2014-15.

Under the current rules, tax relief is available when expenses are incurred ‘wholly, exclusively and necessarily in the performance of the duties of the employment’, such as a business phone call.

However, if an employee pays for something that puts them in a position to do their job, such as the cost of commuting there and back, then these expenses are not eligible for tax relief. There are also provisions for relief for specific expenses, such as professional fees and subscriptions or travel and subsistence.

The Government says that, although it has no fixed ideas on the matter and no plans to remove the relief on employee expenses, it wants to understand the use of the relief better, given its size and importance.