Tax Position for Relocation Costs
Please note, relocation expenses must be approved by the Head of College/Service before a contract of employment is signed.
The expenses must have been incurred as a result of a change in residence, typically either by taking up a new employment, or as a result of a secondment by an existing employer.
Expenses and benefits which can be claimed under £8,000 tax exempt relocation allowance:
- disposal or intended disposal of old residence (see A).
- acquisition or intended acquisition of new residence (see B).
- transporting belongings (see C).
- travelling and subsistence (see D).
- domestic goods for the new residence (see E).
- bridging loans in relation to the purchase of the new home.
Expenses not covered:
- any sort of subsidy if the house prices in the new area are higher than the employee’s previous home.
- mortgage interest payments for the employee's existing home.
- compensation for any loss made on the sale of the employee’s home.
- compensation for other losses incurred in moving home.
- re-direction of mail.
- Council Tax bills.
- transporting and kennelling for domestic animals.
The expenses must be incurred, or the benefit given to the employee within one year following the end of the tax year in which the change to their employment occurred.
The old home must not be within a reasonable travelling distance of the new workplace, whereas the new home must be within a reasonable travelling distance to the new workplace.
Visa costs can be included for reimbursement within the relocation allowance when a new employee applies for their visa outside the UK.
• legal expenses and services connected with the disposal.
• legal expenses and 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, for example a mortgage, or if it was secured on the property, for example a home improvement loan.
• 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 telephone.
• 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 empty period is not allowable.
• 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. This covers both structural surveys and building society valuations.
• 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 telephone services.
This covers the physical removal of domestic belongings from the old residence to the new and the costs of insuring them in transit.
Removal includes:
• packing and unpacking.
• temporary storage, where there is not a direct move from the old to the new residence (but temporary storage is not an eligible cost if the employee has no intention of moving the belongings to the new residence).
• taking down domestic fittings in the old residence if they are 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 his or her family or household.
• preliminary visits to the new location.
• travelling from the old home to 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.
• travelling between the old home and the temporary living accommodation.
• travelling from the new home to 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.
The exemption applies where domestic goods intended to replace items used at the old home that are not suitable for use in the new home are purchased or provided by the employer or where the employer reimburses the employee’s cost of purchasing such items. Examples would be carpets and curtains that were the wrong size for the new home, or an electric cooker bought to replace a gas cooker where there is no gas supply in the new home.