Can companies offer to pay relocation expenses tax free?

Answered by: Katie Williams, of Hazlewoods LLP

With a difficult recruitment market and in order to attract the right candidate you may need to look a bit further afield than originally envisaged to fulfil a job vacancy. To help encourage the leap, an employer can offer to contribute up to £8,000 (including VAT) towards qualifying relocation costs, tax free.

There are certain conditions to satisfy, including time limits for the expenditure, but broadly the exemption applies where the employee has moved house to start a new job, as their previous home was not within a reasonable travelling distance.

The employer can pay for, or reimburse, certain costs incurred by the employee including legal costs, stamp duty land tax, transportation and/or temporary storage costs, temporary accommodation costs and travel and subsistence costs for the employee and their family members.

The exemption does not cover costs such as a round sum paid by the employer as a general contribution to relocating, mail forwarding costs, council tax bills, mortgage or housing subsidies, school fee penalties or the cost of new school uniforms.

As mentioned above, there are several conditions to be satisfied to ensure that the expense/benefit would be considered as qualifying. We would recommend that professional advice is sought in advance to confirm the tax implications of any relocation or other benefits offered for both the employer and the employee.

For more information contact Katie Williams on 01242 237661 or or visit