Relocation costs
1. If a company pays an employee's moving costs, how's this recorded?
If the company pays for an employee to move house, the company or the employee might also have to pay taxes or National Insurance.
First, figure out if a moving cost is "qualifying" or "non-qualifying".
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Qualifying moving costs
Qualifying moving costs include buying or selling the house, moving, buying things for the house, and bridging loans.
If the moving costs are "qualifying" and less than the £8,000 limit, there's no tax or National Insurance to pay.
Watch the video on adding "Qualifying moving costs" expenses.
Read more from HMRC: "What you do not have to report"
Non-qualifying moving costs
If it turns out that the moving expense isn't "qualifying", use one of the following three options.
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1. Company arranged benefit
If the company chooses the supplier, and then pays the supplier directly, then:
- Add a "Benefit in kind" expense.
- Keep "Arranged by" as: "Company"
This way the benefit is taxed by Income Tax (PAYE) and Class 1A National Insurance correctly.
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2. Employee arranged benefit
If the employee chooses the supplier, but then the company pays the supplier directly, then:
- Add a "Benefit in kind" expense.
- Set "Arranged by": "Employee"
This way the benefit is taxed by National Insurance correctly.
3. Company reimburses employee
If the employee paid the cost of a personal expense out of their own pocket, and now the company's paying them back, then:
- Add a "Once only taxable benefit" expense.
This way the expense is taxed by both Income Tax (PAYE) and National Insurance.
See also...
- Read more from HMRC: Expenses and benefits: relocation costs
2. How do I add qualifying costs for an employee?
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"How do I enter "qualifying" moving costs?"
The qualifying moving cost limit
HMRC sometimes labels "moving costs" as "qualifying costs". The following explains what to do when the "qualifying" moving cost is over the £8,000 limit.
- Because it's over the £8,000 limit, you'll need to first create a "Standard moving expense" for the first £8,000.
- And then create a "Benefit in kind" "Remaining moving expense" for the remaining amount.
- However, keep in mind, if your cost's less than the £8,000 limit, you'll only need to do the first step.
"Ok, so how do I create the "Standard moving expense" for the part under £8,000?"
To create a "Standard moving expense" part for up to £8,000:
- First, click:
Menu > Expense claim - Select the person who's moving.
- Then click: Expense
- Enter £8,000 and click: Next
- Select an option from the "Qualifying costs under £8,000", then click: Next
- You can attach an image, like a receipt, or click: Skip
- Once you're happy with it, click: Save
- And finally, your new "Standard moving expense" is now added to the person's paystub.
To see a "Standard moving expense":
- First, click:
Amount - Then click: See on paystub
- Now you'll see a new "Standard moving expense" added under: "Post-tax benefits and reimbursements"
- And finally, that's how you know the "Standard moving expense" was created successfully!
"How do I then create the remaining expense for the "qualifying costs" over £8,000?"
To create a "Remaining moving expense" for a person's second part over £8,000:
- First, click:
Menu > Expense claim - Click the person who's moving.
- Scroll down and select: "Benefit in kind"
- Enter: £2,500
- Leave "Arranged by" as "Company", and click: Next
- Now you can write some notes about the "Remaining moving expense" if you'd like.
- When you're finished, click: Next
- You can attach an image, like a receipt, or click: Skip
- Once you're happy with it, click: Save
- And finally, your new "Remaining moving expense" is now added to the person's paystub.
To see a "Remaining moving expense":
- First, go to Amount, and click: See on paystub
- Now you'll see there's a new "Remaining moving expense" added under: "Benefits in kind ... company arranged"
- And finally, that's how you know the second part of the "Remaining moving expense" was created successfully!
And that's it! That's everything you need to know about adding "qualifying" moving costs!