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CATEGORY - INCOME TAX

EMPLOYMENT EXPENSES

Many employers pay their staff expenses for costs incurred in doing their jobs. Travel and subsistence are the main items and these are usually reimbursed on regular expense claims, either on a receipts basis or by reference to internal scale rates. Yet not all employers pay as much as they could do on scale rates. Mileage payments for business trips in an employee's own car, for example, are often paid at something like 20p per mile, which is usually based on the cost of the fuel.

However, the taxman is actually more generous than this as the maximum tax free rate for use of an employee's own car is 45p per mile for the first 10,000 miles in any one tax year and 25p per mile thereafter. This is meant to cover all the other costs of running a car as well, not just petrol. It is also worth noting that you can claim an extra 5p per mile for each passenger you carry on company business, and even bicycles are allowed at 20p per mile. However, the journey must be for travel to a temporary workplace, not for ordinary commuting. See our information sheet on Travel & Subsistence for more details about this.

If your employer does not pay you the maximum tax free rate for mileage in your own car, you are entitled to claim back the difference on your tax return. All you need to do is declare it in Box 17 on page E1. Of course, it would be advisable to keep a mileage log detailing where you have been and when (and for what reason).

There are also tax free scale rates for subsistence. These can be used instead of the actual costs if you do not have the receipts, although it has to be said they are not particularly generous. The maximum you can get is £25 per day, and in order to claim even this much you would have to be away more than 10 hours, buy an evening meal plus two other meals earlier in the day and not get home until after 8pm. You would probably be better off keeping the receipts and claiming them from your employer. Still, if your employer does not reimburse even this much, you can claim the difference back on your tax return.

Home working is another area where you can claim expenses not reimbursed by your employer. To be fair, it is very difficult to prove you have incurred an additional cost just by working at home as it has to be wholly, exclusively and necessarily for work purposes in order to be tax free. Many employers don't want the risk involved in paying what may well turn out to be taxable items. However, they are allowed to pay you up to £4 per week for working at home as part of an ongoing arrangement. That last bit is very important, as you are not entitled to the £4 per week just for working at home on an ad hoc basis. It may not sound very much but it is worth £208 per year which would save you £83.20 as a higher rate taxpayer. Enough to buy a meal for two on Tax Freedom Day!

Professional subscriptions such as membership of trade associations are another expense that you can claim on your tax return. Some employers reimburse these to their staff or pay them on their behalf but quite a few don't, and if your employer falls into the latter category you should claim for them and make sure they are added to your tax code. The only stipulation is that a professional fee or subscription must be relevant to your job, which is self-evident if you work in the same field.

Capital allowances are the other main type of work expense recognised by the Revenue. These enable you to claim tax breaks for any plant and machinery you buy to use in your job the same way that a self-employed person could, except that they must be wholly, exclusively and necessarily for work purposes. This can be quite difficult to prove. A workman on a building site would probably be able to claim for his tools as it is normal for construction workers to bring their own tools to work, but for office workers it is a different matter. It must be necessary for you to use your own equipment to get the job done, and if you choose to work at home and use your own computer rather than going to the office and using the computers there, that does not count as a qualifying expense. It is only when you are required to work at home and use your own equipment that you have the right to claim it as a tax-deductible expense, and even then only if there is insignificant private use.

As an alternative to claiming expenses on your tax return, you could agree a Salary Sacrifice scheme with your employer that would not only save tax but also Class 1 NI for both you and your employer. More about this on the next sheet.


Acumen Tax Solutions
2 Purley Bury Avenue, Purley Oaks, Surrey CR8 1JB
Tel: 020 8406 9425 Mobile: 07813 582890 E-mail: info@acumentaxsolutions.co.uk

For information of users: Although every care has been taken in compiling this material, it only provides an overview and does not take the place of an individual consultation. We strongly advise all users to consult the detailed legislation or seek professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or this firm.

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