Newsletter issue – May 2024
Q: I've started a new job quite recently with a hybrid working arrangement. I work from home 3 or 4 days per week, so that is my main place of work. However, I do have a significant journey - it takes more than two hours when I do go in. In terms of expenses, do my journeys to work qualify for tax relief?
A: Thanks for your question. This is actually a subject which has risen to the surface lately after HMRC issued a clarification. The upshot is that when a hybrid worker travels to their employer's office, it does NOT qualify for tax relief.
We've seen a debate on this since hybrid became a new common working pattern after the pandemic, with some arguing the case that going to the office should count as a 'journey in the performance of the duties of employment'. Under this description, these travel expenses normally do qualify for tax relief for employees.
The new HMRC guidance stated: 'The fact that an employee's home is treated as a workplace for tax purposes is not enough, on its own, to enable the employee to obtain relief under Section 337 for the expenses of travelling to another permanent workplace. For most people, the place where they live is a matter of personal choice. So the expense of travelling from home to any other place is a consequence of that personal choice, not an objective requirement of their job.'
It adds: 'The expenses of travelling from home to another workplace do not qualify for relief under Section 337 unless the location of the employee's home is itself dictated by the requirements of the job.'
However, if you were on a remote worker contract, as many these days are, that would be different if you were asked to travel into an office.
The HMRC guidance says on this: 'Where an employee's home is itself a place of work, the cost of travel between there and other permanent workplaces may sometimes be deductible under Section 337 as travel in the performance of the duties.'
Q: We have just offered a job to someone who is ex-Army. She has just left and this is her first job outside the Armed Forces. She mentioned that there may be a relevant tax relief for us to consider, but I hadn't come across this before. Can you clarify what that would be?
A:
It's true that in hiring a veteran there is a tax implication to consider - but a good one! Your new recruit will be referring to the fact that businesses who employ former UK Armed Forces personnel, who are entering their first job in civilian employment, can apply zero-rate of secondary National Insurance contributions (for that employee) for up to 12 months. To ensure the veteran qualifies for the NI relief, you must only double check these two points. They must have:
- served at least one day in the regular armed forces
- completed at least one day of basic training
The way you need to claim the relief is by submitting a revised Final Payment Submission (FPS) using National Insurance category letter V for qualifying veteran employees. The relief only applies to the part of the employee's earnings below the veterans upper secondary threshold.
Q: I'm going to be introducing benefits to employees of my business for the first time, including gym membership and private medical insurance. I believe I need to be arranging the reporting of these benefits to HMRC? What's the best way to go about this?
A:Firstly, you're right. As with other types of taxable income and benefit, they have an associated monetary value, and do need to be reported to HMRC. You may have heard of a P11D form? If not, what that is a means to report 'benefits in kind' - the type of benefits for staff that you're talking about.
You need to submit a P11D for all staff and directors who get benefits - whether these are the ones you've outlined or anything else.
Any items that your business pays for which the staff member gains benefit from must be included on the P11D. So, think also about phones, company cars, loans for rail season tickets, and so forth. Some expenses are not required to be included in these forms. That's things like business travel and entertainment expenses or credit cards used for company purposes.
In terms of filing a P11D they must be submitted to the tax man by July 6 after the tax year in question. They only accept digital filing these days. It's all online.
The alternative to the P11D is paying benefits via payroll. You must register with HMRC if you want to do this, but it could save time, depending on how many staff you have (and therefore how many P11D forms you need to fill out). And in actual fact, changes are afoot that mean in future (from April 2026) the P11D will be scrapped, and it will become mandatory to report employment benefits and pay Class 1A National Insurance Contributions (NIC) through payroll software.
So, you might consider whether it's best to be prepared for this compliance change now, rather than wait. |
