PAYE12050 - Coding: coding deductions and expenses: expenses: flat rate expenses (Action Guide)

Many workers are obliged to spend small amounts each year in maintaining tools and special clothing that are necessary to carry out the duties of their employment.

To deal with individual expenses computations for each employee and to contact all employers for confirmation would be cumbersome, costly and time consuming for individuals, employers and HMRC.

To allow these small claims in an efficient and cost effective manner, HMRC has agreed national Flat Rate Expenses (FREs) with trade unions or other bodies. The customer also benefits from less paperwork as they are not required to keep a record of all the individual amounts they spend.

FREs are only permitted where an expense is necessarily incurred by an employee (see EIM32710). Section 367 ITEPA 2003 states FREs are intended to represent the average annual expenses incurred by employees on repair, maintenance and replacement of loose tools and special clothing.

Before you process a FRE claim you should be familiar with the guidance at PAYE12045.

You should deal with claims to FREs based on the information provided by the employee, subject to the industry and occupation being listed in the Employment Income Manual at EIM32712 or covered by EIM32485.

You should not routinely contact employers in relation to FRE claims. If an employer has a Customer Relations Manager (CRM) you should contact the CRM who will either advise you of the FRE allowable or contact the employer on your behalf.

When you are examining a FRE claim you should follow steps 1 - 9 below.

1.

Review the Contact History notes

2.

Does the claim relate to renewing tools and special clothing (including uniform) that are necessary to carry out the duties of their employment, as per EIM32700?

 
  • Yes - go to step 3

 
  • No - this is not a FRE claim, see PAYE12045 

3.

Check the EBS notes. Is there an entry that is relevant to the FRE claim?

 
  • Yes - allow or refuse the claim based on the EBS entry and go to step 9

 
  • No - go to step 4

4.

Check the EBS notes. Is there a Customer Relations Manager (CRM)?

 
  • Yes - contact the CRM and ask how to proceed and go to step 9

 
  • No - go to step 5

5.

Does the claim or the NPS record show the customer’s Industry and Occupation?

 
  • Yes - go to step 6

 
  • No - issue the standard letter on Office Clerical Assistant (OCAE01) to request this information and go to step 9

6.

Is the Industry and Occupation listed at EIM32712?

 
  • Yes - allow the amount listed, net of any employer contributions notified, as per EIM32710 and go to step 9

 
  • No - go to step 7

7.

Does the claim include expenditure on new tools?

 
  • Yes - this is not covered by a FRE. Go to EIM36500 and consider as a Capital Allowance claim

 
  • No - go to step 8

8.

Allow the standard FRE as per EIM32485, net of any employer contributions notified, as per EIM32710

9.

You should always ensure that you

 
  • Update NPS Employment Details to include the Occupation (Job Title) related to the FRE claim, if not already shown

 
  • Make a full Contact History note, see PAYE105000. For FRE claims the note should include

 
    • The amounts claimed

 
    • The items claimed

 
    • The years claimed

 
    • The PAYE reference to which the claim relates

 
    • If allowed, refused or reduced

 
    • Alternative amounts awarded or offered and why

 
    • Details of any enquiries made or explanations given

 
  • File the FRE claim in the DR range

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