P87 expenses form?

[R8Steve]

Could anyone explain when you would use a P87 tax relief form as I’m slightly confused as to whether I should complete one or not.

My company pays my travel expenses as a result of an office relocation and I travelled 16500 miles in the last tax year. This is paid to me at 35p per mile and shows at the bottom of my payslip as ‘Travel’. It is added to my net pay and does not have tax/NI deducted from it.

I have been told from others in the company to fill out a P87 to claim tax relief on the difference which would work out as –

What I get
16500@.35p = £5775

What HMRC says
10000@.45 = £4500
6500@.25 = £1625
Total = £6125

Difference - £350

I do not think that this would apply to me as the travel expenses do not have tax/NI deductions in the first place. Would anyone be able to confirm this?

[Bullett]

I'll bump this for you, but I'm not sure that's right.

I know you can claim for the difference between the 35p and 45p as tax relief on the first 10k. However, I thought that as the approved rate was 25p over that then you would actually be taxed as a BIC on the 10p extra you get on the 6500.

The 45/25 being the max tax free rates.

I'm sure a expert will be along shortly.

[mx stu]

R8Steve said:

Could anyone explain when you would use a P87 tax relief form as I’m slightly confused as to whether I should complete one or not.

My company pays my travel expenses as a result of an office relocation and I travelled 16500 miles in the last tax year. This is paid to me at 35p per mile and shows at the bottom of my payslip as ‘Travel’. It is added to my net pay and does not have tax/NI deducted from it.

I have been told from others in the company to fill out a P87 to claim tax relief on the difference which would work out as –

What I get
16500@.35p = £5775

What HMRC says
10000@.45 = £4500
6500@.25 = £1625
Total = £6125

Difference - £350

I do not think that this would apply to me as the travel expenses do not have tax/NI deductions in the first place. Would anyone be able to confirm this?

I agree with you, assuming this is a permanent workplace then they are simply paying your expenses for getting to work. As such the £5,775 you've received is a benefit in kind and taxable. (See: http://www.hmrc.gov.uk/manuals/eimanual/EIM10020.h... )

ETA: I would expect your employer knows it's taxable and will settle the tax due by way of a PAYE settlement agreement or similar. You might just want to check this out though.

The alternative to this is the 24 month rule which essentially says if you're travelling to perform a task of limited duration then if your employer pays your expenses it's not taxable. (See: http://www.hmrc.gov.uk/manuals/eimanual/eim32080.h... )

Edited by mx stu on Tuesday 2nd July 10:38

[R8Steve]

mx stu said:

I agree with you, assuming this is a permanent workplace then they are simply paying your expenses for getting to work. As such the £5,775 you've received is a benefit in kind and taxable. (See: http://www.hmrc.gov.uk/manuals/eimanual/EIM10020.h... )

ETA: I would expect your employer knows it's taxable and will settle the tax due by way of a PAYE settlement agreement or similar. You might just want to check this out though.

The alternative to this is the 24 month rule which essentially says if you're travelling to perform a task of limited duration then if your employer pays your expenses it's not taxable. (See: http://www.hmrc.gov.uk/manuals/eimanual/eim32080.h... )

Edited by mx stu on Tuesday 2nd July 10:38

It is a 24 month arrangement I have in place and the travel policy states a rather contradictory statement to HMRC - Car - Employees own vehicle - Amount allowed is 35p per mile (after 15,000 miles 10p of the 35p will be taxed) for car drivers.

Going with the above i will be liable for BIC tax on 1500 miles but i'm still not sure if the P87 is required for the difference between the 35p/45p paid for the 15k miles (or 10k if we go with HRMC guidelines) given that it is paid tax free. For the amount of it it's hardly worth my while i know but i like to keep on top of all HMRC matters, good or bad.

[mx stu]

R8Steve said:

It is a 24 month arrangement I have in place and the travel policy states a rather contradictory statement to HMRC - Car - Employees own vehicle - Amount allowed is 35p per mile (after 15,000 miles 10p of the 35p will be taxed) for car drivers.

Going with the above i will be liable for BIC tax on 1500 miles but i'm still not sure if the P87 is required for the difference between the 35p/45p paid for the 15k miles (or 10k if we go with HRMC guidelines) given that it is paid tax free. For the amount of it it's hardly worth my while i know but i like to keep on top of all HMRC matters, good or bad.

In my opinion HMRC's approved mileage rates here are a red herring and irrelevant in this scenario.

The approved mileage rates are in connection with work journeys undertaken by employees. What you are being reimbursed for is private travel from home to your place of work.

I believe your company can pay you whatever it wants as a reimbursement for this private journey. If it's temporary and covered under the 24 month rule it wont be assessed as a benefit in kind. If it's not covered then it will be assessed as a benefit in kind and tax will be due.

[R8Steve]

mx stu said:

In my opinion HMRC's approved mileage rates here are a red herring and irrelevant in this scenario.

The approved mileage rates are in connection with work journeys undertaken by employees. What you are being reimbursed for is private travel from home to your place of work.

I believe your company can pay you whatever it wants as a reimbursement for this private journey. If it's temporary and covered under the 24 month rule it wont be assessed as a benefit in kind. If it's not covered then it will be assessed as a benefit in kind and tax will be due.

Thanks for that, you've put it forward a lot clearer than the HMRC website and that confirms what i thought firstly...god only knows what my colleagues are doing!

[Eric Mc]

There is a general rule that home to work mileage CANNOT be claimed in respect of "home to work" travel i.e. the "normal commute".

However, if the assignment is of a temporary nature i.e. less than two years, then it will be allowed.

HMRC can ask for documentary evidence of the latter if they want to.

[northandy]

Eric Mc said:

HMRC can ask for documentary evidence of the latter if they want to.

I recently claimed tax relief on my mileage for the first time, i get 15p per business mile and a monthly car allowance (which i pay tax on) i had to provide all copies of my expense books.