Relocation expenses (480: Appendix 7)
Find out more information on relocation expenses and benefits that qualify for exemption.
1. Removal expenses and benefits which qualify for exemption
Expenses and benefits which qualify for exemption can be grouped into 6 categories:
- disposal or intended disposal of old residence
- acquisition or intended acquisition of new residence
- transporting belongings
- travelling and subsistence
- domestic goods for the new residence
- bridging loans
2. Disposal expenses and benefits
The property must be owned by, or a tenancy or other interest held by:
- the employee
- the employee and one or more members of his or her family or household (see chapter 1, paragraph 1.22)
- one or more members of the employee’s family or household
2.1 The property, or the interest in it, must be disposed of, or be intended to be disposed of, in consequence of a change of residence to which the removals relief applies (see 480:chapter 5).
2.2 Disposal also includes intended disposal. The expenses of a sale that falls through will still be expenses which qualify provided that the employee does still change his or her residence.
2.3 The specific expenses and benefits covered are:
- legal fees or services connected with the disposal
- legal fees or services connected with the redemption of a loan relating to the property. A loan relates to a property if it was raised to acquire the property, or if it was secured on the property
- penalties for redeeming a loan relating to the property
- estate agent’s or auctioneer’s fees or services
- advertising
- disconnection of electricity, gas, water or phone services
- if the property is left empty awaiting disposal
- any rent paid for the period when the property is empty
- insurance for the period
- maintenance of the property during the period
- preserving the security of the property during the period
The Council Tax for the period is not allowable.
3. Acquisition expenses and benefits
Acquisition covers both the buying of a new residence and the acquisition of a tenancy or other interest.
3.1 The property must be acquired by, or the tenancy or other interest held by:
- the employee
- the employee and one or more members of the employee’s family or household (see chapter 1, paragraph 1.22)
- one or more members of the employee’s family or household
3.2 Relief is also available where an intended acquisition does not take place, either for reasons outside the control of the person acquiring the interest, or because that person reasonably decides not to go ahead.
3.3 The specific expenses and benefits covered are:
- legal expenses and services connected with the acquisition
- legal expenses and services connected with any loan raised to acquire (the interest in) the property
- procurement or arrangement fees connected with such a loan
- mortgage indemnity premiums
- survey or inspection of the property
- Land Registry fees in England and Wales
- fees payable to the Keeper of the Registers of Scotland
- fees payable to the Land Registry in Northern Ireland or to the Registry of Deeds for Northern Ireland
- Stamp Duty
- connection of electricity, gas, water and phone services
4. Transport of belongings
This covers the physical removal of domestic belongings from the old residence to the new, and the costs of insuring them in transit.
4.1 Removal includes:
- packing and unpacking
- temporary storage if a direct move from the old residence to the new is not made
- taking down domestic fittings in the old residence if they’re to be taken to the new residence, and reattaching them on arrival there
The domestic belongings covered are those of the employee and members of the employee’s family or household.
5. Travel and subsistence
The employee can have eligible travel and subsistence for:
- preliminary visits to the new location
- travelling between the old home and the new work location
- travelling between the new home and the old work location (where the house move takes place before the job transfer)
- temporary living accommodation (see 5.5 below)
- travelling between the old home and the temporary living accommodation
- travelling between the new home and the temporary living accommodation (where the house move takes place before the job transfer)
- travelling from the old home to the new home when the move takes place
5.1 Members of the employee’s family or household (see chapter 1 paragraph 1.22) can have eligible travel and subsistence for:
- preliminary visits to the new location
- travelling from the old home to the new home when the move takes place
5.2 Where a child stays behind at the old location or is sent ahead to the new location in order to ensure continuity of education, relief may be available for the child’s costs of travel and subsistence.
The conditions are that the child must be:
- a member of the employee’s family or household
- under 19 at the beginning of the year of assessment in which the job move takes place
5.3 Relief is available for the cost of subsistence in the area where the child stays, and for the costs of travel between that area and the employee’s old or new home.
International moves
5.4 Where a foreign national comes to the UK for employment his or her travelling costs and those of their spouse and family may be eligible for relief under Sections 373 and 374 ITEPA 2003. If the expenses do qualify for relief in this way they’re not expenses which qualify for exemption for the purposes of the removals relief. The effect of this is that the foreign national will be able to get the travelling costs as well as £8,000 of removal expenses tax-free.
Where a person resident in the UK goes abroad to work the travel costs and those of that person’s spouse and children may be eligible for relief under Sections 341 and 342 or 370 and 371 ITEPA 2003. If the expenses do qualify for relief they’re not expenses which qualify for exemption for the purposes of the removals relief. The effect of this is that the employee will be able to get the travelling costs as well as £8,000 of removal expenses tax-free.
5.5 The relief for temporary living accommodation (see 5 on page 107) applies where the employee intends to move to permanent accommodation to complete the relocation. For an employee who lives in a hotel until the old home is sold and a new home bought, or who moves into a rented house at the new location for the same reason, the hotel and the rented property represent temporary living accommodation.
5.6 Where the employer provides temporary living accommodation in a hotel or similar, the measure of the benefit to be charged or counted against the £8,000 limit is the cost to the employer. Where the accommodation counts as living accommodation for the purposes of Section 97 ITEPA 2003 (see chapter 21) the measure of the benefit is the amount that would otherwise be chargeable under Section 97.
5.7 Subsistence is defined for the purposes of the removals legislation as meaning ‘food, drink and temporary living accommodation’.
6. Domestic goods for the new residence
Relief under this heading is available where:
- the employee, or
- the employee and one or more members of the employee’s family or household (see chapter 1 paragraph 1.22), or
- one or more members of the employee’s family or household disposes of an interest in the old home and acquires an interest in the new home
The relief applies where domestic goods intended to replace items used at the old home which are not suitable for use in the new home are bought or provided by the employer.
7. Bridging loans
Relief is available where:
- bridging loan interest is reimbursed to the employee
- the employer ‘makes’ a cheap or interest-free loan (see chapter 17 paragraph 17.8) to the employee which meets the conditions below
7.1. The general conditions are that:
- the employee, or
- the employee and one or more members of the employee’s family or household (see chapter 1 paragraph 1.22), or
- one or more members of the employee’s family or household
(a) Disposes of an interest in the old home and acquires an interest in the new home.
(b) Has to take out a loan to bridge the gap between the date when the interest in the new property is acquired and the date when the sale proceeds of the old property are available.
(c) Uses the loan only to redeem loans relating to the old home or to acquire the new home. A loan relates to the old home if it was raised to acquire the property, or if it was secured on the property.
(d) The loan does not exceed the market value of the old home at the time the new home is acquired.
7.2 Where the bridging loan is not provided or facilitated by the employer, and the conditions at (a), (b), (c) and (d) above are satisfied, the interest on the loan is an expense which qualifies for exemption. If either or both of the conditions at (c) and (d) are not met the eligible interest is restricted to the amount that would be payable if the loan met both conditions.
7.3 Where the employer makes a loan (see chapter 17 paragraph 17.8 to the employee or to a member of the employee’s family or household, and conditions (a) to (d) above are met, relief may be available if the total of all other qualifying expenses and benefits is less than £8,000.
Relief is calculated using the formula:
A ÷ (B × C) × 365
Where:
A is the difference between the total of all other qualifying expenses and benefits and £8,000.
B is the maximum amount of the loan outstanding between the date the loan is made and the date when the time limit expires.
C is the official rate of interest (see Appendix 4) in force at the time when the loan is actually made.
The result is rounded up to the nearest whole number. The answer is treated as a number of days. The charge to tax under Section 173 ITEPA 2003 is calculated on the basis that the loan was made that many days later than it was actually made.
If the loan is repaid before the end of the number of days calculated by using the formula there’s no charge to tax under Section 173.