There are many employees throughout the UK who are, on occasions, required to dip into their own pockets in order to make purchases intrinsic to carrying out their job function. For some, the completion of a simple expenses claim form presented to their employer will be sufficient to see them adequately recompensed. However, for others, a reimbursement may be made for an amount less than their entitlement or there may be no reimbursement at all. Would a claim for tax relief be admissible and if so, how does one go about making that claim?

Whilst the self-employed need to have incurred expenditure wholly and exclusively for the purposes of their trade, employees have an additional condition to satisfy in that it must be also incurred ‘necessarily’ in the performance of their duties. This makes obtaining a deduction somewhat more restrictive, as for something to be necessarily incurred, it means that there is no choice in the matter. In plain speaking, if the expense is not incurred, the job does not get done. Contrast this to a self-employed individual who merely needs to incur expenditure that puts them in a position to carry out their trade.

Despite the additional condition, there are still a number of scenarios whereby an employee could be missing out on invaluable tax relief. I have listed the main categories of claim below:-

• Where an employer has paid the employee for travelling in their own car at less than the HMRC approved 45 pence per mile for the first 10,000 business miles (25p thereafter).
• The cost of business travel on public transport (not ordinary home to office commuting) visiting clients or other workplaces.
• Expenditure on accommodation and meals whilst away on business.
• Tools purchased for use in your employer’s business. An example of this is a garage mechanic who may be able to claim significant capital allowances on tools that have a useful life in excess of two years.
• Subscriptions to HMRC approved bodies and unions.
• Business working from home.
• The cost of business calls using a home telephone.
• Flat rate expenses to cover the purchase of certain HMRC approved uniforms (such as nurses) and associated cleaning costs.
• Any other general expenditure incurred wholly, exclusively and necessarily in connection with the performance of employment duties, not otherwise reimbursed by an employer.

Under current legislation, a claim may be made within four years of the tax year end of the year in which the expenditure was incurred. With this in mind, an employee who has incurred personal qualifying expenditure for many years may go back as far as 2010/11, making a claim for this and all subsequent tax years.

Whilst those employees who complete a Self-Assessment Tax Return can include any claim within employment supplementary pages, the availability of the underused P87 form can come to the rescue for those who do not complete a Tax Return.

The four page form can be accessed via the HMRC website and until recently was available for completion in PDF format only. However, HMRC are currently offering a trial online version, which is incredibly quick and easy to use. I went through the form using ‘dummy’ information and managed to successfully negotiate it in a matter of minutes. For a self-confessed ‘technophobe’ and someone who has very little patience with form filling, that is a mightily impressive turnaround!

Any ensuing refund can be made directly into the bank account of the employee or if you fancy a walk down to the bank, via a cheque payment!

The only drawback is that for each year, only £2,500 worth of expenditure can be claimed outside of the Self-Assessment regime. If you consider that a claim by a higher rate taxpayer covering £2,500 for four years worth of allowable expenditure would net £4,000 plus supplement (interest paid by HMRC), it is a potentially lucrative exercise.

It is important that following any claims, you keep an eye on your PAYE tax code, as HMRC will attempt to allow relief at source moving forwards. If the code contains an allowance for, say a professional subscription that is no longer payable by the employee, an assessment may be raised to claw back the relief.

Finally, if claims for tax relief have been made in earlier years and the expenses claimed are less than £1,000, HMRC allow you to make claims for subsequent years via the telephone. If the expenses were in relation to professional subscriptions the limit is increased to £2,500.

Although HMRC have made it considerably easier to obtain tax relief in recent years, the lack of publicity for such claim mechanisms means that the general public are often left unaware of their existence. Do not lose out!