Where an employee has to relocate within the company then the first £8000 of removal expenses and benefits are exempt.
As a director/employee of your own limited company, if you move home/office due to relocation of your place of work there may be some exceptional and valuable allowances to claim from the company. This is called a relocation allowance.
However, you will need to make sure that you meet ALL 4 of the qualifying conditions in order to claim these costs.
REASON for relocation must be one of the following:
- A new job: you changed your job and place of employment. Your new place of employment must be significantly far away from your current residence to make relocation necessary.
- Change of duties: your duties have changed and you have been transferred to another department or branch as a result, which means you must travel a greater distance to your place of work.
- Change of location: the place where you carry out your duties has moved, which means that you must travel a greater distance to your place of work.
CATEGORIES of expenses and benefits must fall into one of the six below:
- Sale of former residence (= Benefit);
- Bridging loans: (= Benefit);
- Purchase of new residence: (= Expense);
- Removal costs of business/personal effects to new residence/premises: (= Expense);
- Associated travel and subsistence costs: (= Expense);
- Domestic goods for new residence: (= Expense).
TIME LIMIT to claim allowance
There is a time limit in which you can claim the allowance, and to qualify, the expenses must be incurred or the benefits must be provided before the end of the tax year immediately following that in which the employee’s circumstances changed due to work, outlined in the first step of this list. So bear in mind, if you changed your residence due to work commitments that meet the criteria given above in July 2014 (Tax Year 2014/15), you must claim all eligible expenses related to your relocation before April 5th 2016.
DISTANCE from place of work
The employee’s new residence must be a reasonable commutable distance from the new place of work; the former residence must not be within reasonable daily travelling distance of the new place of work.
When looking at distance from place of work, please note that HMRC are keen to maintain that your old residence is not within reasonable commutable distance and similarly your new residence is within reasonable commutable distance to your place of work. What is a reasonable or unreasonable commutable distance? Clearly this is down to personal circumstances to some extent, but about 40 miles one way is considered a reasonable commutable distance.
There are some non-qualifying expenses and benefits, these include:
- Mortgage or housing subsidies incurred by moving to a higher-cost area;
- Mortgage interest payments for your existing home;
- Compensation for any financial loss on the sale of your former home;
- Compensation for other losses, such as penalties for withdrawing a child from school without sufficient notice;
- Re-direction of mail;
- Council tax bills.