In recent months, HMRC has introduced a significant shift in the process of claiming PAYE expenses, a move aimed at reducing the growing risk of ineligible claims. The changes, which came into effect on 14 October 2024, now require employees to provide supporting evidence for expense claims via the P87 form, marking a more stringent approach to tax relief claims. Let’s dive into what these changes mean for employees, employers, and tax agents.

Why the Change?

Previously, employees could claim income tax relief on allowable PAYE expenses, such as professional subscriptions, mileage, or work-related travel, with fewer checks. However, HMRC identified an increasing number of ineligible claims that not only posed a risk to the tax system but also led to the misallocation of taxpayer funds.

HMRC’s goal with these changes is clear: to ensure that individuals only receive the tax relief they are genuinely entitled to. The new process is designed to prevent errors or misuse of the system and promote better compliance. By requiring evidence upfront, HMRC hopes to make it easier for people to claim the correct amount of tax relief and avoid costly corrections later.

What’s Changing?

From 14 October 2024, individuals claiming employment related PAYE expenses will no longer be able to submit claims online or over the phone. Instead, claims must be made using the P87 form, and claimants must provide supporting evidence to verify their expenses. This includes documents such as:

• Professional subscriptions: Receipts or proof of payment.
• Mileage claims: Detailed logs with the purpose of travel and starting and ending points.
• Hotel and meal expenses: Receipts with dates, locations, and amounts.
• Working from home: Proof from the employment contract showing that working from home is mandatory.
• Other work-related expenses: Receipts or other evidence showing the items purchased and employment details.

Why Is Supporting Evidence Required?

The new evidence requirements are designed to prevent ineligible claims from being processed, ensuring that only those who genuinely incurred work-related expenses receive the tax relief. HMRC aims to eliminate the need to chase incorrect claims after they’ve been processed, reducing delays for legitimate claimants. Additionally, these changes disrupt the business model of firms that submit non-compliant or fraudulent claims on behalf of employees.

What If You’ve Already Made a Claim?

For those whose claims were paused after 10 June 2024, HMRC is now contacting them to request the necessary supporting evidence. If you’re one of these claimants, you will need to provide the required documentation to move forward with your claim.

What About Digital Claims?

HMRC recognizes that many customers prefer digital options for submitting claims. While the online route for most expenses is currently unavailable, it will be reinstated for “uniform, work clothing, and tool expenses” by 31 October 2024, with the full digital route for other expenses expected by April 2025. In the meantime, all claims must be submitted via post.

What This Means for Tax Agents

For tax agents and professionals submitting claims on behalf of clients, the new process should not present significant changes. Agents already regularly submit P87 forms by post and are familiar with collecting and providing supporting evidence. However, it’s important for agents to educate clients on these new requirements to ensure smooth processing.

How to Ensure Compliance

The most important step for individuals and agents is to ensure that claims for PAYE expenses are valid and supported by appropriate evidence. HMRC has been clear about the types of evidence required and the consequences of submitting ineligible claims. The “Don’t Get Caught Out” campaign further emphasizes the need for individuals to verify their eligibility before making any claims.

Key Takeaways

1. Claims must be submitted using the P87 form: From 14 October 2024, employees can no longer submit PAYE expense claims online or by phone, except for certain flat-rate expenses.
2. Supporting evidence is now required: HMRC will not process claims without adequate proof of expense.
3. Check eligibility before claiming: HMRC encourages claimants to ensure they meet the criteria for expenses before filing claims to avoid penalties and delays.
4. Digital options will return: Online claims for uniform and tool expenses will be available from 31 October 2024, with the full digital route expected by April 2025.

These new measures reflect HMRC’s ongoing efforts to protect the integrity of the tax system and ensure that taxpayers receive the relief they are entitled to — nothing more, nothing less. By following the new guidelines and providing the necessary documentation, employees can continue to benefit from tax relief on eligible work expenses without issue.

For more information on the changes, visit the official HMRC website or consult with a tax professional to guide you through the updated process.