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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I incurred rented accommodation costs as part of a relocation,

Resolved Question:

I incurred rented accommodation costs as part of a relocation, as I understand it these are exempt where the costs are temporary, for instance where a property is subsequently purchased or the length of stay is not considerable. However following my relocation (in place of redundancy following a company re-organisation) the company performance was below expectations and recruitment freeze put in place, I decided not to buy a property as work was the main reason for relocating to that area. Subsequently a consultation period was entered into (about nine months after relocating) and I was given notice of redundancy.
As such I stayed in the property until the end of my contract, as such can I still claim this as temporary accommodation, as this was the intent but the circumstances (early end of the contract) prohibited it? I have since left the property and the area without taking any further employment there.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

Relief from tax for relocation expenses paid or refunded to an employee including the rental of a property is limited to £8,000 and only where such expenses are incurred within the period from the date of the move to the end of the tax year following that in which the move took place. Take a look at page 19 and at Appendix 7 of the HMRC guide, Booklet 480 (2014) starting on page 106 here for the detail. The fact that things didn't work out for you doesn't affect the validity of your claim.

Expenses in excess of £8,000 paid by your employer or reimbursed to you or paid or reimbursed to you beyond the end of the tax year following that in which the move occurred are taxable on you and may also be subject to national insurance contributions. Take a look here for more information.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.

Hi Tony,

Thanks for coming back to me so quick.

The claim is within the £8,000 and prior to the end of the tax year, however I did not have another home during the period for which I am claiming.

So whereas the accommodation was intended to be on temporary basis in that I was looking for either longer term rental accommodation or to purchase a property in retrospect it may be seen that it was for a considerable period and therefore not temporary. As noted here :http://www.hmrc.gov.uk/manuals/eimanual/eim03117.htm

So my main question is does it matter how long I was there? From the guidance it looks as if I was still working/living there then it would not be valid. Contract was rolling 6mths (break clause), and went on for 18mths

I am currently in a dispute with my former employer over whether my costs constituted temporary so I wanted to check what the tax perspective was, whether they would apply PAYE and if they did would I be able to reclaim etc.

thanks again

Expert:  TonyTax replied 2 years ago.
How long were you in the rented accommodation? Were you in rented accommodation before you moved to the new work location?
Customer: replied 2 years ago.

I was in the accommodation a total of 18 months, it started on 24th April I relocated 1st of May. Yes I was renting prior to relocation.

Expert:  TonyTax replied 2 years ago.
Thanks.

What agreement did you come to with your employer over the move to the new work location?
Customer: replied 2 years ago.

That I would have an allowance of 8k and that eligible expenses for this were rent and service charges, deposit, utilities, admin fee for temporary accommodation. As well as legal/removal costs for house purchases or sale.

No conditions on what constituted temporary were provided and the costs are specific to rental properties rather than hotel or serviced accommodation.

The rental agreement I had was limited to maximum of one year with a 6 month break included on request (they would not do tenancy agreement of less than one year).

Expert:  TonyTax replied 2 years ago.

Thanks.

There is no statutory definition of "temporary accommodation" and many employers use the £8,000 allowance as an inducement even when they are unsure that the employee will not be taxed on it. Each case is looked at on its merits.

What worries me about your situation is that you didn't have to sell a property in the old location though that is not a requirement, nor is it a requirement to buy one in the new location yet you stayed in the one place for 18 months, presumably with your rent being paid.

HMRC may take the view that this place effectively became your new home in which case you may be subjected to tax and national insurance contributions on the rent paid by your former employer unless you can come up with a very good reason why you had to stay there for so long. The fact that the minimum rental term was a year and the the possibility that there was a lack of availability of suitable accommodation within a reasonable distance from your work place may help you.

Customer: replied 2 years ago.

OK, making sense, but just to lastly clarify.

If I claimed relocation on a rented property for a period of say 6 months then moved into either another rented property or bought the eligibility of the costs claimed under the 8k tax allowance for the first property wouldn't be in question?

In terms of length of stay, would uncertainty in the workplace be sufficient? The director who arranged my move left 3 months after, there was recruitment freeze that directly affected my department after 6 months, found out department was being centralised after 9 months, redundancy process announced after 11.

thanks for your help this should be all I need.

Expert:  TonyTax replied 2 years ago.
I'm not quite sure what you mean by your second paragraph (the eligibilty of the costs). You didn't mention that you had moved after six months. What the tax office won't not tax is an indefinite payment of rent by an employer for an employee. In my experience of claims made by clients, where the total claim has been under £8,000, HMRC has rarely questioned it but that doesn't mean they won't. As I said in an earlier post, every case is looked at on its merits.

All of the circumstances that you mention in the third paragraph might help you as they would cause uncertainty and a feeling of insecurity amongst employees.
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