His Majesty’s Revenue and Customs (HMRC) has introduced significant changes to the way PAYE (Pay as You Earn) expense claims are processed. These changes are designed to improve accuracy and transparency in expense claims but require employees to follow stricter procedures when claiming their expenses.
One of the key updates is the mandatory submission of a P87 form, accompanied by evidence such as receipts or invoices. This new requirement is crucial for employees who regularly claim expenses, and understanding the changes is essential to avoid delays or rejections of claims.
Key Changes to PAYE Expense Claims
The recent reforms focus on tightening the claim process and ensuring that only legitimate expenses are reimbursed. Here are the main changes to be aware of:
- Mandatory Submission of P87 Form
Previously, many employees could claim work-related expenses informally or through their employer’s payroll system. However, under the new rules, employees must submit a P87 form to HMRC to claim any tax relief on eligible expenses. The P87 form can be submitted online via the HMRC portal or in paper form by post.
The P87 form is used to claim tax relief for expenses such as travel, professional fees, and work tools. This form requires employees to provide details of their employment, the nature of the expenses, and the amounts claimed. Crucially, employees must also submit evidence to support their claim.
- Requirement for Receipts and Documentation
A major change is the strict requirement for employees to provide receipts, invoices, or other evidence when submitting a P87 form. HMRC will no longer accept claims based solely on estimates or flat-rate amounts unless specifically allowed for certain professions. Without proper documentation, claims may be rejected, and employees could face penalties for incorrect submissions.
This change underscores HMRC’s focus on reducing incorrect or fraudulent claims. Employees will need to ensure that they keep accurate records of all expenses they intend to claim, including travel tickets, hotel receipts, and any other work-related costs.
- Simplification of the Digital Process
While the new requirement for submitting evidence might seem like an additional burden, HMRC has aimed to simplify the submission process by encouraging digital claims. The P87 form and supporting documents can now be uploaded directly via HMRC’s online portal, speeding up the process and reducing paperwork. This should result in faster processing times compared to postal submissions.
- Pre-Approved Expense Categories
To further streamline the process, HMRC has introduced a list of pre-approved expense categories that employees can claim through the P87 form. These include costs like travel for business purposes (but not commuting), professional fees, and certain tools and uniforms. However, only specific expenses listed by HMRC can be claimed, and evidence must be provided for each.
- Stricter Scrutiny on Expense Claims
As part of these changes, HMRC has ramped up scrutiny on PAYE expense claims to ensure compliance. Employees must ensure their claims are accurate, as random audits will be more frequent. Incorrect or fraudulent claims could lead to fines or penalties. This is especially important for those claiming large amounts or submitting multiple claims each year.
How These Changes Will Affect Employees
For employees across the UK, these new requirements mean a more formal and documented process for claiming work-related expenses. Here’s what employees should be aware of:
More Administrative Responsibility
The introduction of mandatory P87 forms and the need for receipts means employees must take on more responsibility in managing their expenses. It will no longer be enough to provide a rough estimate—each claim must be backed up with proper documentation. Employees should maintain organised records throughout the tax year to avoid missing any eligible expenses.
Impact on Tax Codes
Claims made via the P87 form can impact an employee’s tax code. When approved, tax relief for the expenses will be reflected in the employee’s PAYE code, potentially reducing their tax burden. However, errors in claims or missing documentation could delay this benefit, so it is essential that employees complete the P87 form accurately.
Potential Delays Without Proper Documentation
One of the biggest changes is the requirement for detailed evidence. If employees fail to provide receipts or supporting documents, their claims could be delayed or outright rejected. HMRC has made it clear that they will no longer accept vague or unsupported claims, so employees must ensure they meet this requirement.
Flat-Rate Allowances and Industry-Specific Claims
In certain industries, flat-rate allowances remain in place for expenses like uniforms or tools, but employees must still submit a P87 form to claim them. For example, haulage workers who need to maintain uniforms or pay for subsistence can continue to claim these expenses, but they must provide evidence of their purchases.
The new HMRC requirements for PAYE expense claims introduce a more structured and formal process, with the P87 form and accompanying receipts playing a central role. While this might add an administrative burden for employees, it also ensures that the system is fairer and more transparent. Employees who stay organised and submit accurate claims with proper documentation will benefit from quicker processing and more reliable tax relief.
As these changes take effect, employees should familiarise themselves with the P87 form and the type of expenses they can claim. By keeping receipts and maintaining clear records, they can ensure their expense claims are processed smoothly and without delay.