28 Apr 2017

Employee expenses under the spotlight

18 April 2017

Call for evidence asks whether the rules are fit for purpose.

The Treasury has published a call for evidence on the taxation of employee expenses, see here.

It wants to ascertain whether current rules or their administration could be clearer and simpler; whether the tax rules for expenses are fit for purpose in the modern economy; and to analyse why the cost to the exchequer of the tax relief for expenses that are not reimbursed has increased.

On the latter point, the Treasury states this costs the exchequer £800m a year, and there has been a 25% increase in claims between 2009-10 and 2014-15. It wants to know why this has happened.

Employers do not need to report the expenses they reimburse – these are, in effect, ignored for tax purposes – so the government has limited data on how much the tax relief for reimbursed expenses is worth.

The government has framed 17 questions which cover:

  • how expenses affect employers – what they reimburse, their policies, the extent of cash allowances;
  • employees’ expectations of how their employer will treat their expenses;
  • changes in expense practices in the past five to ten years;
  • whether they reflect modern working practices;
  • how employees claim the tax relief; and
  • the future of employee expenses.

The treatment of self-employed expenses is excluded from this process.

The call is in response to the Office of Tax Simplification’s review of employee benefits and expenses. This recommended a review of the expenses system to re-establish some general principles and ensure these are in line with employment practices and government policies.

Responses to the Treasury’s document should be emailed here  by 12 June 2017.

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