If you are an employee, who has incurred expenses as part of your employment duties and your employer has not reimbursed these expenses, you may be eligible to claim tax relief on these expenses, depending upon your circumstances. One such way of claiming tax relief is through submission of P87 form to HMRC (Her Majesty's Revenues and Customs).
An employee can claim tax relief for certain expenses incurred as a part of their employment. An employee can claim the expenses that the employer has not reimbursed if the total expenses are less than £2,500.
When employees spend their personal money on work-related expenses, it is not always reimbursed by the employer. In such a case, an employee can claim tax relief on the expenses by submitting form P87 through the phone, post, or online.
If the employee claims for the current year, HMRC will usually adjust the tax code to reduce the tax amount. If the employee claims for previous years, the amount will be refunded as a cheque or bank deposit. As an employee of an umbrella company, you can easily claim tax relief on non-reimbursed expenses by submitting form P87 to HMRC after the end of the tax year.
Not every person is eligible for tax relief through Form P87. Self-employed, independent contractors and employees whose total expense per year exceeds £2,500 cannot use P87.
Eligibility criteria are defined below -
The eligible employees need to provide the details and receipts of their expenses for the period they are applying for. They also have to mention the employer's contributions in the form P87. An employee has to claim tax relief within a period of 4 years after the end of the tax year via Form P87.
Please note the expenses should meet the wholly, exclusively and necessarily test for expenses.
Form P87 can only be used to claim work-related expenses. The employees can claim the following expenses -
Also See: Expense Claim through Umbrella
Employees can submit form P87 through phone, post or online.
1. Claim by phone - If you have already claimed the expenses in the previous year and the total expenses you are about to claim are less than £1,000 and £2,500 (in case of professional fees and subscription), you can claim by phone. Employees should have the following information ready before calling HMRC-
2. Claim by post - If you are claiming the expenses on someone's behalf and claiming relief for more than 5 different jobs, you can claim by post.
3. Claim by Online – You just need to login by entering your government gateway user ID and password; fill a form and submit it online.
Employees who receive partial reimbursement from employers can also file tax relief on the difference amount. For example, if an employee receives a 20p allowance per mile while HMRC offers 45p, the employee can claim tax benefit on the remaining amount.
The pandemic has affected employers and employees in many ways. Many employees are now working from home and are eligible for special allowances. HMRC has also noticed a spike in the cases of home allowance claimants.
w.e.f. Employers were earlier paying £4 per week (2019/20) to employees as a tax-free allowance for working from home. This has been increased to £6 per week or £26 per month 6th April 2020. If the employee has to claim for more than the flat rate (£6/week), the employee must submit proof of additional costs incurred due to working from home. If the employer doesn't reimburse the amount, employees can claim tax relief through form P87.
HMRC recently confirmed that employees do not have to justify the expense for the year 2020-2021 to make the claiming process faster in the time of COVID-19.
Employees who wish to file P87 for previous years can go back up to 4 years. Though in certain cases the expenses may not be significant and the tax relief amount may seems small, the process is relatively easy and worth the money.
For more information speak to our DNS umbrella Expert now