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Part 4Employment income: exemptions

Chapter 7Exemptions: removal benefits and expenses

Exemption of removal benefits and expenses: general

271Limited exemption of removal benefits and expenses: general

(1)No liability to income tax in respect of earnings arises by virtue of—

(a)the provision of removal benefits to which this section applies, or

(b)the payment or reimbursement of removal expenses to which this section applies.

(2)Subsection (1) does not apply if (disregarding this section) the earnings are general earnings to which either of the following sections applies—

(a)section 22 (chargeable overseas earnings for year when employee resident and ordinarily resident, but not domiciled, in UK), or

(b)section 26 (foreign earnings for year when employee resident, but not ordinarily resident, in UK).

(3)Subsection (1) is subject to section 287 (limit on exemption).

272Removal benefits and expenses to which section 271 applies

(1)Benefits are removal benefits to which section 271 applies if—

(a)they are reasonably provided in connection with a change of the employee’s residence which meets the conditions in section 273,

(b)they are provided on or before the limitation day (see section 274), and

(c)they are within subsection (2) or one of the following provisions—

(i)section 277 (acquisition benefits and expenses),

(ii)section 278 (abortive acquisition benefits and expenses),

(iii)section 279 (disposal benefits and expenses),

(iv)section 280 (transporting belongings),

(v)section 281 (travelling and subsistence),

(vi)section 285 (replacement of domestic goods).

(2)A benefit is within this subsection if it is a non-cash voucher, cash voucher or credit-token used—

(a)to obtain goods or services the direct provision of which would be a benefit within one of the provisions specified in subsection (1)(c)(i) to (vi), or

(b)to obtain money for the purpose of obtaining such goods or services or meeting expenses within one of those provisions or section 284 (bridging loan expenses).

(3)Expenses are removal expenses to which section 271 applies if—

(a)they are reasonably incurred by the employee in connection with a change of the employee’s residence which meets the conditions in section 273,

(b)they are incurred on or before the limitation day, and

(c)they are within one of the provisions referred to in subsection (1)(c)(i) to (vi) or within section 284 (bridging loan expenses).

273Conditions applicable to change of residence

(1)The conditions referred to in section 272(1)(a) and (3)(a) which apply to the change of the employee’s residence are conditions A to C.

(2)Condition A is that the change of residence results from one of the following changes—

(a)the employee becoming employed,

(b)an alteration of the duties of the employment, or

(c)an alteration of the place where the employee is normally to perform those duties.

(3)Condition B is that the change of residence is made wholly or mainly to allow the employee to reside within a reasonable daily travelling distance of the place where the employee normally performs or is normally to perform the duties of the employment after the employment change (see section 275).

(4)Condition C is that the employee’s former residence is not within a reasonable daily travelling distance of that place.

274Meaning of “the limitation day”

(1)In this Chapter “the limitation day”, in relation to an employee’s change of residence, means the last day of the tax year after that in which the employee begins to perform the duties of the employment after the employment change, but this is subject to any direction under subsection (2).

(2)The Inland Revenue may direct that the last day of a later tax year is the limitation day in relation to any particular change of residence if it appears to them reasonable to do so having regard to all the circumstances of that change.

275Meaning of “the employment change”

In this Chapter “the employment change”, in relation to an employee’s change of residence, means whichever of the changes specified in section 273(2) results in the change of residence.

276Meaning of “residence”, “former residence” and “new residence” etc.

(1)If an employee has more than one residence, references in this Chapter to the employee’s residence are references to the employee’s main residence.

(2)In this Chapter, in relation to a change of the employee’s residence—

(a)references to the former residence are references to the employee’s residence before the change, and

(b)references to the new residence are references to the employee’s residence after the change.

(3)In this Chapter references to an interest in a residence are, in the case of a building, references to an estate or interest in the land concerned.

Benefits and expenses within this Chapter

277Acquisition benefits and expenses

(1)This section applies if an interest in the employee’s new residence is acquired by—

(a)the employee,

(b)one or more members of the employee’s family or household, or

(c)the employee and one or more members of the employee’s family or household.

(2)The following benefits are within this section—

(a)legal services connected with the acquisition of the interest, including legal services connected with any loan raised by the employee to acquire it,

(b)the waiving of any procurement fees connected with any such loan,

(c)the waiving of any amount payable in respect of insurance effected to cover risks incurred by the maker of any such loan because the loan equals the whole, or a substantial part, of the value of the interest,

(d)any survey or inspection of the residence undertaken in connection with the acquisition, and

(e)the connection of any utility serving the new residence for use by the employee or by the employee and one or more members of the employee’s family or household.

(3)The following expenses are within this section—

(a)sums paid for any services within subsection (2)(a), (d) or (e),

(b)any procurement fees connected with any loan raised by the employee to acquire the interest,

(c)the costs of any insurance within subsection (2)(c),

(d)fees payable to an appropriate registry or appropriate register in connection with the acquisition, and

(e)stamp duty charged on the acquisition.

(4)In this section references to a loan raised by the employee include a loan raised by—

(a)one or more members of the employee’s family or household, or

(b)the employee and one or more members of the employee’s family or household.

(5)In this section—

278Abortive acquisition benefits and expenses

Benefits or expenses are within this section if—

(a)they are benefits provided or expenses incurred with a view to the acquisition of an interest in a residence,

(b)the interest is not acquired—

(i)because of circumstances outside the control of the person seeking to acquire it, or

(ii)because that person reasonably declines to proceed, and

(c)the benefits or expenses would have fallen within section 277 if the interest had been acquired.

279Disposal benefits and expenses

(1)This section applies if the employee has an interest in the former residence and because of the change of residence it is disposed of or is intended to be disposed of.

(2)The following benefits are within this section—

(a)legal services connected with the disposal or intended disposal, including legal services connected with the redemption of a related loan,

(b)the waiving of any penalty for redeeming a related loan for the purpose of the disposal or intended disposal,

(c)the services of an estate agent or auctioneer engaged in the disposal or intended disposal,

(d)services connected with the advertisement of the disposal or intended disposal,

(e)the disconnection, for the purpose of the disposal or intended disposal, of any utility serving the former residence, and

(f)services connected with maintaining, insuring, or preserving the security of, the former residence at any time when it is unoccupied pending the disposal or intended disposal.

(3)The following expenses are within this section—

(a)sums paid for any services within subsection (2)(a), (c), (d) or (e),

(b)any penalty for redeeming a related loan for the purpose of the disposal or intended disposal,

(c)rent paid in respect of the former residence at any time when it is unoccupied pending the disposal or intended disposal, and

(d)expenses of maintaining, insuring, or preserving the security of the former residence at any time when it is unoccupied pending the disposal or intended disposal.

(4)In this section references to the employee having an interest in a residence include—

(a)one or more members of the employee’s family or household having such an interest, or

(b)the employee and one or more members of the employee’s family or household having such an interest.

(5)A loan is a “related loan” for this purpose if—

(a)it was raised to obtain an interest in the former residence, or

(b)it is secured on such an interest, or

(c)part of it was so raised and the rest of it is so secured.

280Transporting belongings

(1)The following benefits are within this section—

(a)the transportation of domestic belongings from the employee’s former residence to the employee’s new residence, and

(b)the effecting of insurance to cover such transportation.

(2)The following expenses are within this section—

(a)expenses connected with such transportation, and

(b)the costs of any such insurance.

(3)In this section—

281Travelling and subsistence

(1)The following benefits are within this section—

(a)subsistence and facilities for travel provided for the employee and members of the employee’s family or household for temporary visits to the new area for purposes connected with the change of residence,

(b)any other subsistence provided for the employee,

(c)facilities provided for the employee for travel between the employee’s former residence and—

(i)the place where the employee’s new duties are normally performed, or

(ii)the new place where the duties of the employee’s employment are normally performed, or

(iii)temporary living accommodation of the employee,

(d)where the employment change is within section 273(2)(b) or (c) (change of duties or place of performance), facilities provided for the employee for travel before the change between the employee’s new residence and—

(i)the place where the employee normally performs the duties of the employment before the change, or

(ii)temporary living accommodation of the employee,

(e)facilities provided for the employee and members of the employee’s family or household for travel from the employee’s former residence to the employee’s new residence in connection with the change of residence,

(f)subsistence provided for a relevant child while the child stays in education-linked living accommodation,

(g)facilities provided for a relevant child for travel between education-linked living accommodation and the employee’s accommodation.

(2)For the purposes of this section, “education-linked living accommodation”, in relation to a relevant child, means living accommodation where the child stays for the purpose of securing continuity in education, being—

(a)accommodation in the new area where the child stays before the employee’s change of residence,

(b)accommodation in the former area where the child stays after that change,

(c)accommodation in the new area where the child stays while the employee is living in temporary living accommodation in the former area, or

(d)accommodation in the former area where the child stays while the employee is living in temporary living accommodation in the new area.

(3)For the purposes of subsection (1)(g) “the employee’s accommodation”, in relation to travel to or from education-linked accommodation, means—

(a)if that accommodation is within subsection (2)(a), the employee’s former residence,

(b)if that accommodation is within subsection (2)(b), the employee’s new residence, and

(c)if that accommodation is within subsection (2)(c) or (d), the employee’s temporary accommodation.

(4)The cost of providing subsistence or travel of a kind described in subsection (1) is an expense within this section.

(5)Subsections (1) and (4) are subject to section 282 (exclusion from this section of benefits and expenses where deduction allowed), and subsection (1) is also subject to section 283 (exclusion from this section of taxable car and van facilities).

(6)In this section—

282Exclusion from section 281 of benefits and expenses where deduction allowed

(1)Benefits and expenses are excluded from section 281 (travelling and subsistence) if or to the extent that an amount is deductible in respect of the cost of the benefits or of the expenses under any of the following provisions.

(2)They are—

(a)section 341 (travel at start or finish of overseas employment),

(b)section 342 (travel between employments where duties performed abroad), and

(c)Chapter 5 of Part 5 except section 376 (deductions for earnings representing benefits or reimbursed expenses in respect of certain foreign travel).

(3)If an amount is so deductible in respect of part only of the cost of a benefit, the part of the benefit excluded by this section is to be determined on a just and reasonable basis.

283Exclusion from section 281 of taxable car and van facilities

(1)A car or van is not treated as a facility for the purposes of section 281(1) if in the tax year in which it is provided it is also made available—

(a)to the employee or members of the employee’s family or household for private use not falling within section 281(1),

(b)by reason of the employee’s employment, and

(c)without any transfer of the property in it.

(2)The following sections apply for the purposes of this section as they apply for the purposes of Chapter 6 of Part 3 (taxable benefits: cars, vans and related benefits)—

(a)section 115 (meaning of “car” and “van”),

(b)section 117 (meaning of car or van made available by reason of employment), and

(c)section 118 (availability for private use).

284Bridging loan expenses

(1)Expenses are within this section if—

(a)the employee has an interest in the former residence and disposes of it because of the change of residence,

(b)the employee acquires an interest in the new residence, and

(c)the expenses are interest payable by the employee in respect of a loan raised by the employee wholly or partly because expenditure is incurred in connection with that acquisition before the proceeds of that disposal become available.

This is subject to subsections (2) and (3).

(2)Interest is only within this section if or to the extent that the loan is used—

(a)for acquiring the employee’s interest in the new residence, or

(b)for redeeming a loan—

(i)which was raised by the employee to obtain an interest in the former residence,

(ii)which is secured on such an interest, or

(iii)which was partly so raised and the rest of which is so secured.

(3)If the loan exceeds the market value of the employee’s interest in the former residence at the time of acquisition of the new residence, the interest on the excess is not within this section.

(4)If subsection (3) applies in a case where the loan is used partly for purposes within subsection (2) and partly for other purposes, the amount of the interest within this section is the appropriate fraction of the total interest.

(5)The appropriate fraction is—

Formula - ML divided by L

or, if it is smaller—

Formula - PL divided by L

where—

  • MV is the market value of the employee’s interest in the former residence at the time of acquisition of the new residence,

  • PL is the part of the loan used for purposes within subsection (2), and

  • L is the amount of the loan.

(6)In this section—

(a)references to a loan raised by the employee include a loan raised by—

(i)one or more members of the employee’s family or household, or

(ii)the employee and one or more members of the employee’s family or household, and

(b)references to the employee having, disposing of or acquiring an interest in a residence include—

(i)one or more members of the employee’s family or household having, disposing of or acquiring such an interest, or

(ii)the employee and one or more members of the employee’s family or household having, disposing of or acquiring such an interest.

285Replacement of domestic goods

(1)Benefits and expenses are within this section if—

(a)the employee has an interest in the former residence and disposes of it because of the change of residence,

(b)the employee acquires an interest in the new residence,

(c)in the case of benefits, they are domestic goods provided to replace goods used at the former residence which are unsuitable for use at the new residence, and

(d)in the case of expenses, they are incurred on the purchase of domestic goods intended for such replacement.

(2)In this section references to the employee having, disposing of or acquiring an interest in a residence include—

(a)one or more members of the employee’s family or household having, disposing of or acquiring such an interest, or

(b)the employee and one or more members of the employee’s family or household having, disposing of or acquiring such an interest.

286Power to amend sections 279 to 285

(1)The Treasury may by regulations amend sections 279 to 285 so as to secure that benefits or expenses which would not otherwise fall within any of those sections do so.

(2)The regulations may include such supplementary, incidental or consequential provisions as appear to the Treasury to be necessary or expedient.

(3)Those provisions may be made by amending this Chapter or otherwise.

(4)The regulations apply to a change of an employee’s residence resulting from an employment change occurring on or after the day specified in the regulations for this purpose.

Limit on exemption

287Limit on exemption

(1)If in the case of any change of residence the value of the exemption exceeds £8,000, section 271 (exemption of removal benefits and expenses) does not apply to the excess.

(2)The value of the exemption is an amount equal to the sum of—

(a)the section 62 earnings, and

(b)the benefits code earnings (after taking account of section 64(2)(b) where otherwise an amount that falls within paragraph (a) would be included).

(3)In this section “the section 62 earnings” means all earnings within section 62 (earnings) in respect of which section 271 would prevent liability to income tax from arising if this section were disregarded.

(4)In this section “the benefits code earnings” means all earnings—

(a)which are treated as such under the benefits code (except earnings so treated under Chapter 7 of Part 3 (taxable benefits: loans)), and

(b)in respect of which section 271 would prevent liability to income tax from arising if this section were disregarded.

(5)In the case of living accommodation, the amount that would be so treated is to be taken to be equal to—

CE - D

where—

  • CE is the cash equivalent of the accommodation under Chapter 5 of Part 3 (taxable benefits: living accommodation) for the period in which the accommodation is provided (calculated as mentioned in section 103), and

  • D is any amount deductible under section 364 (deductions where living accommodation provided).

Special exemption and relief for bridging loans

288Limited exemption of certain bridging loans connected with employment moves

(1)No liability to income tax arises by virtue of Chapter 7 of Part 3 (taxable benefits: loans) in respect of a loan if—

(a)it is a removal benefit (see subsection (2)),

(b)the unused removal benefit exemption condition is met (see subsection (3)), and

(c)the loan is discharged before the end of the exempted loan discharge period (see subsection (4)).

(2)For the purposes of this section and section 289, a loan is a removal benefit if—

(a)it is raised by the employee in connection with a change of residence meeting the conditions in section 273 (conditions applicable to change of residence),

(b)the employee has an interest in the former residence and disposes of it in consequence of the change of residence,

(c)the employee acquires an interest in the new residence,

(d)the loan is raised wholly or partly because expenditure is incurred in connection with that acquisition before the proceeds of that disposal become available, and

(e)the loan is made before the limitation day.

(3)For the purposes of this section and section 289 the unused removal benefit exemption condition is that, in the case of the particular change of residence—

(a)the sum specified in section 287(1) (limit on exemption), exceeds

(b)the amount referred to in section 287(2) (the value of the exemption);

and for those purposes that excess is “the unused exemption”.

(4)In this section and section 289 “the exempted loan discharge period”, in relation to a loan, means the period of N days beginning with the day on which it is made, taking N as the number obtained by applying the following formula and, if that does not give a whole number, rounding up the result to the nearest whole number—

Formula - (A divided by (B multiplied by C)) multiplied by 365

where—

  • A is the unused exemption,

  • B is the maximum amount of the loan outstanding in the period beginning with the time when the loan is made and ending with the limitation day, and

  • C is the official rate of interest in force when the loan is made (expressed as a percentage).

(5)In this section—

(a)references to a loan raised by the employee include a loan raised by—

(i)one or more members of the employee’s family or household, or

(ii)the employee and one or more members of the employee’s family or household, and

(b)references to the employee having, disposing of or acquiring an interest in a residence include—

(i)one or more members of the employee’s family or household having, disposing of or acquiring such an interest, or

(ii)the employee and one or more members of the employee’s family or household having, disposing of or acquiring such an interest.

(6)The tax payable in respect of a loan for a tax year ending before the limitation day may be decided on the basis that the unused removal benefit exemption condition will not be met.

289Relief for certain bridging loans not qualifying for exemption under section 288

(1)This subsection applies to a loan if—

(a)it is a removal benefit (see section 288(2)),

(b)the unused removal benefit exemption condition is met (see section 288(3)), and

(c)the loan is not discharged before the end of the exempted loan discharge period (see section 288(4)).

(2)A loan to which subsection (1) applies is to be treated for the purposes of Chapter 7 of Part 3 (taxable benefits: loans) as if it was made on the day after the last day of the exempted loan discharge period.

(3)Subsection (2) does not apply for the purposes of sections 176, 177, 180, 189 and 190.

(4)The tax payable in respect of a loan for a tax year ending before the limitation day may be decided on the basis that subsections (1) and (2) will not apply because the unused removal benefit exemption condition will not be met.