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HMRC internal manual

Business Income Manual

Specific deductions: administration: removal expenses: employees

Where an employee has to change residence at the trader’s request or insistence, whether as a result of the trader’s own removal to new premises or otherwise, reasonable contributions by the trader towards the removal expenses of employees and their families, or expenses incidental to the move (for example, cost of visits to the new area, contributions to legal expenses, miscellaneous expenses, grants etc) should normally be allowed. Such contributions should be regarded as including payments under schemes, which guarantee the sale price of the employees’ former private residences.

Where, instead of giving such a guarantee, the trader buys an employee’s house, the question arises whether the trader’s expenditure is capital or revenue. Where the house is purchased at a fair valuation, is immediately placed on the market by the trader, and is sold as quickly as possible without being used by the trader in the meantime (for example, by letting or by occupation by either the trader or other employee), the transaction should be dealt with as revenue. The incidental costs (legal, stamp duty, estate agents etc) and any loss on disposal of the house, should be allowed unless, exceptionally, they are not wholly and exclusively incurred for the purposes of the trader’s business. Equally, any profit on disposal of such houses should be treated as a trading receipt.

Similarly, where the employer uses the services of a relocation company, any management fees (together with any grossed-up tax paid if the employee’s tax liability has been met) are generally an allowable deduction.