Relocation expenses

Qualifying removal expenses and benefits up to £8,000 per move in connection with job-related residential moves are not taxable.

Included are expenses of disposal, acquisition, abortive acquisition, transport of belongings, travel and subsistence, bridging loans and duplicate expenses (replacement domestic items). (ITEPA 2003, sections 271-289).

A company operated a housing scheme for employees whom it transferred from one part of the country to another. Two employees who were transferred made a loss on the sale of their houses and the company paid them compensation under the scheme. They were assessed on the compensation and appealed.

The cases went through the courts to the House of Lords, who unanimously held that the compensation was not a taxable emolument. [Hochstrasser v Mayes; Jennings v Kinder, HL 1959, 38 TC 637]. See 'Related links'.

See also: Dr Wald (TC1052). Dr Wald was paid removal expenses by his employer, but failed to show the excess over £8,000 on his tax return.

When he filed the return, he had not received a P11D and HMRC was aware of this. They felt that, despite this, he was negligent in preparing his return and imposed a 10 per cent fine for negligence.

Dr Wald, an American who relied on his accountants to complete his return, could not be expected to know that removal expenses are taxable in the UK to the extent that they exceed £8,000, unlike in the US, where they are not taxable.

HMRC’s compliance handbook (CH84540) states that ‘a person who goes to an apparently competent professional adviser, gives the adviser a full and accurate set of facts, checks the adviser’s work or advice to the best of their ability and competence and adopts it… will have taken reasonable care to avoid inaccuracy’.

Despite this, his appeal was rejected and the penalty upheld.