PART 2: TAX
• to the extent that the loan does not exceed the market value of the former home at the time of the purchase of the new.
Certain expenses and benefits are excluded, e.g.: • mortgage or housing subsidy where moving to a higher cost area • interest payments on the former home mortgage • mail re-direction • council tax bills for the former home • purchase of children’s school uniforms • compensation for lost benefits such as unused season tickets • compensation for any loss on the sale of the former home. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS From 6th April 1998 relocation packages, to the extent that they exceed £8,000, are subject to NICs in alignment with tax. Further advice is available on the HMRC website at https://www. gov.uk/expenses-and-benefits-relocation . ROUND SUM ALLOWANCES AND SCALE RATES Where an employer makes payment by fixed rate allowance for an item of expense, such allowances are normally subject to tax and NICs (unless previously agreed with HMRC as part of a dispensation). Where a round sum allowance is less than actual expenditure (verified by receipts) it is the employee’s responsibility to claim any additional tax relief via their Self-assessment return or using Form P87, which would be reflected in a subsequent year’s coding allowance. HMRC officers will not only seek to establish that actual expenditure has been incurred, but also that such expenditure was reasonable. Scale rates are different to round sum allowances as they are intended to do no more than reimburse an employee but without the need for receipts. From February 2008 HMRC agreed that scale rates for travel and subsistence could be agreed to be paid as part of an employer’s dispensation (i.e. paid without any taxable benefit occurring or reporting being required) as long as a sampling exercise had been carried out to demonstrate no profit had been received by the employee. HMRC subsequently introduced benchmark scale rates fromApril 2009 that can be used without any prior sampling. Benchmark rates for foreign travel are available from the HMRC website (previously the Foreign and Commonwealth office) – see https://www.gov.uk/government/ publications/scale-rate-expenses-payments-employee-travelling-outside-the-uk . No printing, copying or reproduction permitted. As part of the benefit in kind changes which were implemented on 6th April 2016 a change to the established method of approving scale rates was introduced. HMRC has retained its list of benchmark rates but has scaled down its approval of bespoke rates. Employers can retain bespoke rates but this will apply only from 6th April for a maximum of five years. As soon as an existing bespoke rate comes up for renewal HMRC will expect the employer’s re- application to include consideration of the current benchmark rates. Failure to reapply will render the bespoke rate invalid and a corresponding benchmark rate will become applicable.
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