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HMRC internal manual

PAYE Manual

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HM Revenue & Customs
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PAYE service income, allowances, benefits and deductions: IABD: expenses

The table shows the type of expense and identifies whether

  • The amount is carried forward to be coded in CY+1
  • It is part of the Expenses allowed in coding

Items noted as part of Job Expenses are allowed as a total for Job Expenses in coding.

For more information see PAYE12045, PAYE11110 and EIM31610.

Item Carried Forward Part of Job Expenses
     
Job Expenses YES YES
Flat Rate Job Expenses YES  
Earlier Year’s Adjustment NO  
Professional Subscriptions YES  
Hotel and Meal Expenses YES YES
Other Expenses YES YES
Vehicle Expenses YES YES
Mileage Allowance Relief YES YES

 

 

Job Expenses

For expenses claimed on a form P87 for Hotel and Meal Expenses, Other Expenses, Vehicle Expenses for claims prior to 5 April 2002 and Mileage Allowance Relief for claims after 5 April 2002

  • Enter the allowable amount

When you make a change to any item which makes up Job Expenses ensure you record the information in the relevant field and review the amount entered in the Job Expenses field as this could also include any item which is part of Job Expenses which was included at migration from COP.

Note: SA autocoding updates Job Expenses, therefore, if updating an SA customer’s record with details of their expenses as listed above, you should update this field and not include the amount in any other expenses field, as this may result in the customer receiving duplicate expenses within their tax code when SA autocoding takes place.

Employment income expenses can only be set off against earnings from the employment to which the expenses relate. EIM31655 refers.

This rule can not be applied in every case. If the expenses claimed relate to a secondary employment, only the allowable amount should be included in the appropriate IABD field. This will allocate the expenses to the primary employments tax code but the rules in EIM31655 still apply. If the expenses relevant to an employment exceed the earnings, the excess expenses cannot be set against earnings from any other employment that the individual may have.

For Example

Primary estimated earnings £10,000

Secondary estimated earnings £4,000 (expenses claimed £5,000)

The total expenses recorded in IABD is £4,000

For Expenses which cover 2 or more sources see PAYE12046.

Flat Rate and Professional Subscriptions

  • Enter the allowable amount

Earlier Year’s Adjustment (EYA)

An EYA should only be calculated where the customer or their agent has not specified that they want to receive a repayment.

The New Amount field will contain the amount of EYA which is used in the Tax Code calculation and

  • It is read only
  • If you access the Expenses screen from IABD Summary screen the EYA View Record icon on the right hand side will only be available if there is a calculated amount of EYA
  • When cases are migrated from COP to the PAYE Service you will see an amount of EYA in the Current amount on the Expenses screen but you will not be able to view any details

To view Earlier Years Adjustment Calculation

  • Select the View Record icon

To calculate the EYA you must only make an entry in

  • The CY year from IABD Landing

Then select

* The Edit Record icon for Expenses
* The Edit Record icon for EYA

Note: EYAs can be given in a Reconciliation calculation. If you are allocating expenses for an earlier year for the purpose of reconciliation refer to PAYE93001.

You will be presented with Earlier Year’s Adjustment screen. The top half of the screen will display the current amounts already allowed in the code for each item for each tax year and is read only

  • Tax year CY-1 to CY-6
  • Current Job Expenses Amount
  • Current Flat Rate Expenses Amount
  • Current Professional Subs Amount

You will enter the new amounts in whole pounds for the appropriate years in

  • New Job Expenses Amount
  • New Flat rate Expenses Amount
  • New Professional Subs Amount

Note: You can enter more than one amount at any one time for any year, or combination of years.

The Already Given Amount will be populated with the sum of expenses which are displayed in the current amount fields. You can

  • Amend the amounts if required
  • You must select the [Save] button and the system will display the Earlier Year’s Adjustment Calculation screen. It will display

    • The Tax Year
    • Claim - this is the amount of the total expenses less the amount already given
    • Tax rate
    • Amount - this is the calculated amount of relief due
    • RI Due - this is the calculated amount of repayment interest
    • Repayment this Tax Year - total amount due for the tax year
    • EYA Coding Adjustment which will be included in the tax code

All fields are read only except the Tax Rate. Where the rate is displayed, it will be shown at Basic Rate. You must check that this is the correct rate to use and amend as necessary. If end of year reconciliation has taken place, you can use that to determine the correct tax rate, for more information see PAYE93001.

Please ensure the correct tax rates are entered if dealing with a Scottish taxpayer

  • Enter the relevant tax rate for each year
  • Select Recalculate

This will display the calculated amount.

You must select the [Submit] button. The button will not be displayed if you have accessed the screen from IABD Summary. This will display

  • Expenses screen
  • The calculated coding adjustment in the Earlier Year’s Adjustment field

You must now select the [Save] button to take you to the Landing page and [Submit] the changes, see SPD 6a.

Notes:

1.Where you include an EYA in the CY tax year and the customer is liable to higher rate tax on their total liability but only liable at basic rate on the primary employment, you must set the auto inhibit signal and make a Contact History note to ensure that the EYA is adjusted at reconciliation.

2.When prompted to issue a revised code the EYA and accompanying note will be automatically included on the P2.

3.EYA will only be displayed on the Expenses screen when a claim has been calculated and an EYA is due.

4.If the expense claimed has already been allowed in the appropriate fields on this screen, no EYA will be calculated and displayed.

Other Expenses

If an individual claims expenses for using their home as a workplace refer to the Employment Income Manual at EIM32760 onwards.

For the tax year 2006-07 onwards HMRC agreed a standard weekly amount that can be allowed, this standard amount changed in 2008-09, refer to the Employment Income Manual at EIM32815 for the standard weekly amounts.

If the individual satisfies the conditions for this tax relief you should use the Other Expenses field in IABD to record the expenses.