Deduction of Moving Expenses

Can You Deduct Your Moving Expenses?

Exemptions and benefits for employee’s relocation

For companies providing expenses and benefits in connection with a change in the main residence of one of their employee there are some available exemptions under certain conditions.

The HMRC provides information on relocation and exemption for certain expenses and benefits connected to relocations that are due to employment-related reasons.

You may find some more informations on the HRMC website.

There are four sets of qualifying conditions that needs to be met if you want to claim for a partial tax, NICs and reporting exemption for an employee relocation expenses and benefits.

Known as qualifying expenses and benefits  the four sets are defined under the reason for relocation, the cost linked to the relocation (house sale/purchase, moving costs, travels and subsistence…), the time limit for the claim and the reasonable travelling distance.

First, the employee’s reason for relocation must be one of the following:

  • the employee starting a new job with you
  • a change in their employment duties
  • a change in the place where their employment duties are normally carried out

Second, the expenses and benefits must fall into one of the six categories below:

  • the employee’s sale of their old residence
  • their purchase of a new residence
  • transporting the employee’s belongings to the new residence
  • associated travel and subsistence costs
  • domestic goods for the new premises
  • bridging loans

Third, there is a time limit. To qualify, the expenses must be incurred or the benefits must be provided before the end of the tax year after the one in which the employee’s circumstances changed (as outlined in the first step of this list).

Fourth, the employee’s new residence must be within reasonable daily travelling distance of their new normal place of work, and their old residence must not be within reasonable daily travelling distance of the new normal place of work.

Non-qualifying expenses and benefits

A relocation expense or benefit is ‘non-qualifying’ if it doesn’t meet the four sets of qualifying conditions outlined above.

Examples of non-qualifying expenses and benefits include:

  • mortgage or housing subsidies for an employee moving to a higher-cost area
  • mortgage interest payments for the employee’s existing home
  • compensation for any financial loss to the employee on the sale of their home
  • compensation for other losses, such as penalties for withdrawing a child from school weut sufficient notice
  • re-direction of mail
  • Council Tax bills

Tax deduction for employees

Relocation expenses and airfares

Up to £8,000 of reimbursed relocation expenses are exempt from UK tax when you take up your assignment. Relocation expenses incurred before the start of your assignment must also be take into account against the £8,000 limit. If your return relocation is guaranteed under your UK assignment, a further £8,000 of expenses and benefits may be received tax-free when you return home.

Most of relocation expenditure qualify for exemption, subject to the £8,000 limit. Exemptions include UK Storage costs, the cost of temporary accommodation for your family on arriving in the UK, and the cost of duplicate items such as kitchenware or electrical appliances in the UK.

More complete information are available on the HRMC website.