Produced by Tolley in association with Philip Rutherford

The following Employment Tax guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Relocation
  • Introduction
  • Relocation
  • The employee must change his main residence
  • The new residence must be within a reasonable travelling distance
  • The expenditure must be incurred within a certain period of time
  • The £8,000 limit
  • Qualifying costs
  • Disposal costs
  • Acquisition costs
  • More...



A large number of employers pay for the cost of relocation of their employees. Particularly this happens when the employer moves an employee from one location to another in order to perform his duties in that new location or where an employer takes on a new employee who has to relocate to take up his duties.

There is a broad-ranging exemption in place. However it only applies to certain types of expenditure in certain circumstances and is subject to an overall cap.

The legislation for the exemption is at ITEPA 2003, s 271 onwards. HMRC’s guidance is at EIM03100 onwards.


The exemption from tax applies to the first £8,000 of removal expenses where the reason for the relocation is that the employee is changing employer, taking up a new role within an organisation or changing the place where he is normally expected to carry out his duties. The exemption only applies where either the employer, or a third party, pays for the removal expenses or reimburses the costs borne by the employee. Where the costs are not paid for or reimbursed by the employer, the employee is not entitled to tax relief.

If an employee chooses to relocate, eg when taking up a new job, he cannot claim £8,000 of tax relief through his self-assessment tax return or form P87 if the amount was not reimbursed by the employer.

In order for the exemption to apply, a number of conditions must be met, as outlined below.

The employee must change his main residence

In order for the exemption to apply, the employee must actually change his main residence. The employer cannot give the employee an amount of £8,000 exempt of tax simply for taking up a new role or moving location by way of a bonus.

Similarly, an employer who simply pays for the relocation costs of an employee which is not within the exemption is simply settling the pecuniary liability of an employee and this would be taxable as

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