Urgent Changes to HMRC’s PAYE Employment Expense Claims Process

The landscape of tax relief claims is changing rapidly, with HMRC implementing new requirements for PAYE employment expense claims to tackle ineligible submissions.

This blog provides a clear overview of these updates, outlining what you need to know to stay compliant with the evolving rules.

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(Read Time: Approx. 4 minutes)

Topics Discussed:

• HMRC’s new requirements for PAYE employment expense claims.
• Key steps for ensuring compliance with the updated tax relief process.

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Understanding the Shift in PAYE Employment Expense Claims

With the rise in ineligible claims for employment expenses, HMRC is tightening its controls.

Starting from 14 October 2024, HMRC requires all PAYE employment expense claims to be submitted using a P87 form accompanied by supporting evidence.

This move is aimed at preventing erroneous claims before they occur, ensuring tax relief is granted only to eligible individuals.

Why These Changes Were Necessary

HMRC identified a significant increase in incorrect claims for employment expenses, which prompted a temporary halt to processing some claims since 10 June 2024.

This pause allowed HMRC to review its procedures and develop a more robust system that focuses on compliance and fraud prevention.

By implementing stricter evidence requirements, HMRC aims to educate taxpayers about eligibility criteria, thereby reducing errors and stopping ineligible payments before they are processed.

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New Evidence Requirements for Claimants

From 14 October 2024, individuals submitting PAYE employment expense claims must use a P87 form and include proof of their expenses.

Here’s what you need to know about the evidence required:

• Subscriptions to Professional Bodies: Copies of receipts or other proof showing payment for each subscription claimed.

• Mileage Allowance: A detailed mileage log, including reasons for each journey and the starting and ending locations.

• Hotel and Meal Expenses (Subsistence): Receipts showing the dates, names of the establishments, and the costs of the stay or meal.

• Working from Home Expenses: Proof that your employer requires you to work from home, such as a clause in your employment contract.

• Other Expenses: Documentation detailing the specific expenses claimed, along with receipts or evidence showing the name of the item and the amount paid.

For claims related to uniforms, work clothing, and tool expenses (Flat Rate Expenses), evidence is not mandatory, but claimants are still responsible for ensuring eligibility.

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Transition to the P87 Form and Digital Claim Process

With the new process in place, traditional methods of submitting PAYE claims are changing.

From 14 October 2024, claims can no longer be made via the digital form or over the phone.

However, the P87 form will still be available on GOV.UK for printing and postal submission.

Digital Submission Timeline:

• Uniform, Work Clothing, and Tool Expenses: Eligible for online claims starting 31 October 2024.

• Other Expense Claims: Expected to resume digital submission by April 2025.

HMRC recognises that digital claims are more convenient and is working quickly to restore these services while maintaining strict compliance checks.

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Ongoing Efforts to Curb Non-Compliant Claims

In addition to the changes in the PAYE claim process, HMRC has rolled out other measures aimed at reducing tax system abuses.

For instance, in December 2023, the requirements for R40 tax repayment claims were updated to include evidence of PPI claims.

Furthermore, HMRC’s Don’t Get Caught Out campaign warns taxpayers about the risks of submitting ineligible claims, particularly when using certain repayment agents.

HMRC’s enhanced scrutiny extends beyond PAYE claims to include Self-Assessment returns, where compliance projects are underway to validate claims through rigorous evidence checks.

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How to Stay Compliant with HMRC’s Updated Rules

To avoid complications with your PAYE employment expense claims, it’s crucial to:

• Use the P87 form for all claims starting from 14 October 2024.

• Ensure all required evidence accompanies your claim to validate eligibility.

• Regularly check the GOV.UK website for updates on the reinstatement of digital submission routes.

Tax agents accustomed to postal submissions of P87 claims should not face significant changes, but it’s important to remain vigilant about evolving requirements.

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Summary

These updates from HMRC are designed to streamline the process and improve compliance.

By understanding the new evidence requirements and submission procedures, you can confidently submit your employment expense claims and ensure you receive the correct tax relief.

If you’re uncertain about how these changes might affect you or need tailored guidance to maximise your tax efficiency, reach out to Tax Expert today.

Fill out our form here for any questions, give us a call at 01772 788200, or message us on our WhatsApp for out of office hours.

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Kind regards,

Ilyas Patel