COMPLIANCE
the limit is wholly inadequate to reflect the costs of relocating in 2022. Also, where employees relocate from abroad, the costs are likely to be far higher, so potentially this will increase the tax / NIC charges (depending on how generous the employer wishes to be). There are also other costs that may be incurred when moving to the UK from overseas where there are tax / NIC implications. For almost 30 years, there’s been a statutory limit of £8,000 regarding specified qualifying relocation expenses met by the employer, provided certain conditions are met With international moves from abroad to work in the UK, there are likely to be additional expenses incurred that the employer may wish to meet / reimburse. We consider some of these below, together with some commentary on the tax / NIC rules. Transportation costs The tax legislation allows for an exemption from any tax / NIC charge for employees and dependants provided that the Costs associated with international moves employee was non-domiciled and not resident in the UK in the previous two complete tax years, or hadn’t visited the UK in the previous two complete tax years. Therefore, if either condition is met, these costs are exempt, in addition to the £8,000 exemption relating to relocation expenses. The specific costs which may be paid free of tax / NIC under the special rules apply for five years from the date the employee comes to the UK: l the full cost of all journeys from the place where the employee usually lives to the place where they’re working in the UK and back home after carrying out those duties l if the employee’s work in the UK keeps them in this country for 60 days or more –
for the cost of a spouse or civil partner and children travelling from their home to visit or accompany the employee to the place where the duties are performed. This is limited to two trips per annum for family members. Temporary accommodation costs Any costs regarding temporary accommodation will potentially be exempt from a tax change if it’s pending a permanent move, but only within the £8,000 exemption. With international relocations, this could include staying in quarantine in a hotel for a short period of time. We consider there’s reasonable argument for this being allowable for tax / NIC purposes as part of the cost of temporary accommodation pending a change of permanent residence. Though, HMRC may argue this isn’t directly the reason for the accommodation being provided, so the matter would need to be clarified with HMRC. Visa expenses HMRC specifically exempts from a tax / NIC charge the costs of a visa associated with travelling to the UK, where the employee wasn’t domiciled in the UK and not resident in the UK in the previous two complete years, or hadn’t visited the UK in the previous two years. As with the transportation costs, this would be allowable in addition to the £8,000 exemption for relocation expenses. Inoculation costs associated with such travel are also exempt where the conditions set out above are met. Medical tests Medical tests to screen the employee for certain diseases are likely to be allowable for tax / NIC purposes and would be allowable in addition to the £8,000 tax exemption for relocation expenses. Arguably, exemption could be on the basis that it’s a protective measure to benefit others with whom the employee might come into contact. However, it’s more likely to be exempt as a trivial benefit if the cost doesn’t exceed £50. This point could be clarified with HMRC where there’s any uncertainty. Professional subscriptions Employers may wish to meet the cost of membership of professional bodies for those relating to the UK. Provided that the
subscription is relevant to the occupation and the professional body is one of those listed in HMRC’s List 3, the cost would be allowable for tax / NIC purposes. Again, this would be allowable in addition to the £8,000 exemption for relocation expenses. What is not exempt? Unfortunately, there would be no exemption under the relocation rules or any other legislative provisions for any of the following: l permanent property deposit and rent payments for the initial period (say, first month). This would not be allowable for tax / NIC purposes, as it doesn’t relate to a qualifying category of expense under the HMRC relocation rules l essential furniture (bed, mattress, table, chairs, sofa etc.). There’s nothing in the HMRC guidance regarding furniture and we consider the cost of this wouldn’t be allowable for tax / NIC purposes l kitchen utensils (cutlery, kettle, coffee machine etc.). There’s nothing in the HMRC guidance regarding utensils and we consider that the cost of this wouldn’t be allowable for tax / NIC purposes. Should the employer wish to meet any of these expenses, the tax / NIC charges arising could also be met by the employer via a pay as you earn (PAYE) settlement agreement (PSA). Clearly, this would increase the costs to the employer, but this would need to be weighed up against the need to recruit the individual where there are domestic shortages, and may represent good value for money. In summary, the tax / NIC rules do allow for some relief regarding expenses that the employer may wish to meet as an incentive to recruiting employees from overseas. As ever, care should be taken to ensure the rules are correctly followed to avoid any unwelcome surprises. n As ever, care should be taken to ensure the rules are correctly followed to avoid any unwelcome surprises
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| Professional in Payroll, Pensions and Reward |
Issue 84 | October 2022
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