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HMRC internal manual

Employment Income Manual

removal or transfer costs: flat rate allowances

Part 4 Chapter 7 ITEPA 2003

Before the introduction of a statutory exemption for removal expenses and benefits in 1993/94 employers often paid flat-rate disturbance allowances to employees. These were intended to cover miscellaneous costs, and were exempted by Extra-Statutory Concession A5 if the conditions in SE03140 (paragraph SE1232) were met.

The statutory exemption works in terms of actual expenses incurred, so strictly there is no place for flat-rate allowances, which should be subject to PAYE. In practice, however, you may allow an employer to treat such payments as qualifying for exemption if all the following conditions are met:

  • the amounts are in themselves reasonable. What is reasonable will vary from case to case. Typically a flat rate allowance is paid to cover the cost of replacing domestic goods (see EIM03120). Where this would do no more than pay for such items as carpets, curtains, etc and the cost of these is not met by direct reimbursement then you may accept that the amount of the allowance is reasonable.
  • you are satisfied that, taking one employee with another, the amounts paid by an employer are in fact expended on qualifying expenses
  • it is clearly understood that the flat-rate payment will be taken into account when deciding whether the £8,000 limit has been reached.