SE03104 - Removal or transfer costs: qualifying expenses and benefits: main conditions

Part II Schedule 11A ICTA 1988

To qualify for the £8,000 exemption the removal expenses and benefits must be eligible expenses and benefits (see SE03108) and must also satisfy a number of conditions.

Change of sole or main residence

The most important condition is that the employee must change his/her sole or main residence as a result of

• starting a new employment; or
• a change of the duties of his/her employment; or
• a change of the place (or normal place), where the duties are performed.

If you are unsure whether the employee has changed his or her main residence RE344 sets out the factors you need to consider. Where an employee comes to the UK from abroad you can usually accept that the main residence has changed if the employee has become resident in the UK for tax purposes.

If the facts of a particular case suggest this broad rule of thumb is not appropriate then these facts need to be considered when deciding whether the employee has changed his or her residence.

It is no longer necessary for the employee to dispose of the old residence in order to qualify for the exemption. But there must be a change of his or her main residence. If a relocation is cancelled, so that the employee does not in fact change his or her main residence any expenses reimbursed or benefits provided in connection with the cancelled relocation will be taxable.

Reasonable daily travelling distance

The new residence must be within reasonable daily travelling distance of the new normal place of work. The old residence must not be within reasonable daily travelling distance of the new normal place of work.

'Reasonable daily travelling distance' is not defined in the legislation. You should apply common sense and take account of local conditions. In particular, the usual time taken to travel a given distance is an indication of whether that distance is reasonable. Employees in the London area, for example, commonly travel much greater distances, or take longer to travel the same distance, to work than those in other parts of the UK. Bear in mind that employers will not normally pay for employees to move to places which are not convenient for the place of work.

Time limit

In order to qualify for exemption the removal expenses must be incurred or the benefits provided before the end of the year of assessment following the one in which the employee starts the new job (see example SE03106). It does not matter when the employee moves to his/her new home.

For extension of the time limit see SE03105.