Call for evidence on the taxation of employee expenses
We welcome the opportunity to respond to the call for evidence on the taxation of employee expenses.
There have been major changes in the labour market in recent years, and these days, the low-paid are less and less likely to have their employment expenses paid or reimbursed by their employers. We explain to HM Treasury that any tax relief on their unreimbursed expenses is therefore very valuable and helps restore their financial position - even though this is probably limited to 20% of the costs which they have incurred (indeed, if their income is below the personal allowance, even this reimbursement is unavailable).
In our submission, we provide evidence that complexity of the rules and lack of awareness around expenses is one of the main hurdles low paid employees face and look in detail, at why the process for claiming a refund isn't as clear and simple as it could be. We hope our recommendations in these areas may eventually lead to changes that improve the outcomes for those in low paid work and in particular impact on the activities of, sometimes exploitative, tax refund companies in time.
We also flag some complex interactions between the tax and National Insurance, National Minimum Wage and the benefits systems when it comes to the treatment of unreimbursed expenses, in the hope that these can be further consulted on.
In terms of whether the rules are fit for purpose in the modern economy, we say not. In particular they fail to take account of new ways of working, such as the increase in ‘flexible’ roles. Here, we raise the case of agency workers who are ‘temporary’ in the ordinary, natural meaning of the word, but do not get tax relief for their home to work costs under the ‘temporary workplace’ rules.
You can find our response here: Call for evidence on the taxation of employee expenses - LITRG response
You can find the call for evidence here: Taxation of employee expenses call for evidence