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Evidence requirements for employees seeking tax relief on expenses

Where an employee has incurred costs as part of doing their job that their employer has not fully reimbursed, the employee can seek tax relief on those expenses from HMRC. You can help support your employees to do this by making sure they keep evidence of their expenses, and directing them to HMRC’s online claims service. 

Claiming for employment expenses

Typical employment costs can include: 

  • Uniforms, work clothing and laundry costs 
  • Business mileage using their own vehicle, where the employer has paid less than HMRC’s approved mileage rates 
  • Small tools 
  • Professional fees and subscriptions.

Where these have not been fully reimbursed by the employer, the employee can make a claim for tax relief provided certain conditions are met. In addition to funding the costs personally, the employee must have incurred them ‘wholly, exclusively and necessarily’ in the performance of the duties of the employment.

Relief is not available where the employer has fully reimbursed the costs – but some relief might be available if the employer has only reimbursed part of the costs.  

It’s important for the employee to understand that a claim to HMRC will only give tax relief on the costs involved, not a reimbursement of the full cost. If they have incurred an eligible cost of £100 which has not been reimbursed, then as a basic rate taxpayer the tax relief available would be worth 20% x £100 = £20.  

Evidence requirements 

Ensuring that employees can evidence the costs they have incurred is important. In some cases, they will need to supply the evidence as part of their claim, in other cases they will need to retain it in case HMRC opens an enquiry. The evidence needed depends on the type of expense they are looking to claim for. 

In most cases it will be necessary to keep receipts, eg of meals or hotel expenses, or purchase costs of small tools or items of uniform.

But for business journeys where an employee has used their own vehicle for work and wants to claim relief on mileage which has not been reimbursed at the full HMRC approved mileage rates,  then a mileage log will be needed. This should show the reason for each journey, and the postcodes for the start and end points. (Please note that tax relief is not available for journeys between the employee's home and their usual place of work.) 

The only time supporting evidence is not required is where an employee wants to claim flat rate expenses (other than for business mileage). 

How to claim tax relief on unreimbursed expenses

There are two main routes that employees can use to get tax relief.

Where the employee has unreimbursed expenses of less than £2,500 in a tax year and they do not otherwise need to complete a tax return, HMRC provides a dedicated online service to claim tax relief. Employees who can’t complete the process online can use a paper form P87. In either case, the employee must provide evidence of the costs they have incurred to support their claim. 

Where the employee’s unreimbursed expenses exceed £2,500 for a tax year, the individual is required to register for self-assessment and complete a tax return. In this case, no additional evidence is required upfront, but HMRC could request evidence in future as part of an enquiry. 

Employees who are already in self-assessment and completing a tax return for other reasons must make the claim as part of their annual tax return process. 

Further guidance 

Detailed guidance and support – and the route to the online service - can be found on GOV.UK at claim tax relief for your job expenses. 

Further guidance is also available from the Low Incomes Tax Reform Group (LITRG) Tax relief for employment expenses | Low Incomes Tax Reform Group. 

If you don’t reimburse all your employees’ work-related costs, you may wish to share these links with them to help them claim. 

 

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.   

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