Claiming Tax Relief – Form P87

In circumstances where employers are unable to, or company policy only permits partial reimbursement of personal business expenses, employees can claim tax relief on certain work-related expenses in line with HMRC flat rates.

Eligible employees can complete form P87, providing that allowable expenses do not exceed ￡2,500. Claims exceeding this can only be claimed via Self-Assessment.

Some employees may not be familiar with the intent of this form, and as the cost of living continues to spiral it might be an area that employers might consider advising employees to review their tax affairs to ensure they are not missing out on any tax breaks that they might be entitled to.

Interestingly, HMRC is encouraging customers to seek guidance on potential tax reliefs that might be available.

HMRC published a new online version of form P87 in May 2022. The form can be used for multiple tax years and employments however, stipulations are that the new file format must be used for all claims going forward including postal applications.

To ensure there is no confusion in the data requirements for the completion of the form, HMRC has made it clear submissions received on or after 21 December 2022 must include the following additional information:

• Employee’s name, date of birth, and home address including the postcode
• Employee’s national insurance number if they have one
• Amount and description of the expense claimed
• PAYE reference of the employer.

Any forms received on or after this date that are not in the correct format will be declined. Some of the more common personal claims are:

• Working from Home Allowance – Where contractual home working engagements are in force – optional arrangements will not apply (hybrid)
• Uniforms and tools – If employees are required to purchase work clothing, pay costs for cleaning, repairing, or replacing specialist clothing (for example, a uniform or safety boots).
• Mileage claims – where using personal cars for business travel. If paying less than the statutory advisory rates; 45p first 10,000 miles and 25p for every mile thereafter. For Motorcycles, the rate is 24p per mile.
• Professional Fees/Subscriptions – Only those that are approved by HMRC and must be relevant to the employee’s job.

Although some expenses have a standard flat charge, in some instances employees can claim tax relief on the full cost, but employees will need to provide receipts and or records to support claims made.

If the tax relief is agreed upon by HMRC in the current tax year, the employee’s personal allowance will be adjusted to account for the extra tax relief allowed. Claims relating to previous tax years can result in either cheque payments or similar adjustments to the personal allowance.