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Government launch review of tax relief for employee expenses

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One of the details hidden away in the Spring Budget 2017 was a green light being given for a review of the way that income tax relief is handled for employee expenses.

It was first proposed in the Autumn Statement 2016 but confirmed in the recent budget with a date now set, March 20th, for the Government to publish a ‘call for evidence’.

The consultation process will cover both reimbursed and non-reimbursed employee expenses. It seems to be a part of a general drive to make the tax system fairer for various forms of employment.

It’s speculated that a particular concern for HM Revenue and Customs (HMRC) may be circumstances where employees incur tax deductible expenses but these are not reimbursed by their employer.

Instead, they must claim relief via a self-assessment tax return or a separate claim. Many in this situation, however, will not claim the money back because of the complexity and inconvenience of the process.

Digital expense management options 

Mark Groom, a tax expert at accountancy firm Deloitte, said:

“The announcement hints that HMRC may be concerned by expenses which are not reimbursed by their employers. In such cases, employees have to claim relief directly from HMRC under self-assessment.

“There are many examples of perfectly legitimate business expenses which employers may not reimburse, such as professional subscriptions and travel to and between sites in the construction industry.

“It’s early days yet, but if there is a concern with expense claims, with the advent of tax digitalisation, this could be tackled by requiring employees to upload evidence through their personal tax account to substantiate claims for tax relief.”

But, as it stands, all we know for certain is that this is an area that the Government wants to know more about. When the call for evidence is published, it should provide a clearer idea of what they want to focus on.

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