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Overview
Qualifying Relocation Expenses Payments and Benefits covers payments or benefits made by an employer to assist an employee with the costs of relocating for work that meet HM Revenue & Customs qualifying conditions. When these conditions are satisfied, the costs can be exempt from Income Tax and National Insurance up to an annual limit of £8,000 per employee.
To qualify for the exemption, the payments must satisfy all of the following HMRC rules:
The employee must move home as a result of starting new employment or due to a change in work location that makes their previous home unsuitable.
The relocation must be to a location that is reasonably necessary for the job.
Costs must be incurred within the statutory time limits, typically within a defined period before or after the move.
Only appropriate and reasonable relocation costs are covered (for example, estate agent fees, legal costs, removal expenses, and travel costs for the employee and dependants).
When the criteria are met, and payments do not exceed £8,000, these are treated as qualifying relocation expenses that are exempt from Income Tax and National Insurance. Any excess above £8,000, or payments that do not meet HMRC’s qualifying conditions, are taxable and must be recorded under a different benefit type.
Within the BIK module, this benefit type is represented by a single event type, named “Automatically Handled.” This name reflects that there is only one possible outcome: qualifying relocation expenses are payrolled for Income Tax only, with Class 1A NIC applied. There is no alternative event type for other outcomes. If payments do not qualify or exceed the exemption limit, these must be treated as taxable benefits using another event type, such as Payments Made on Behalf of Employee.
For detailed guidance on qualifying relocation expenses and the exempt categories, see GOV.UK: Expenses and benefits - relocation.
This article explains how these events should be applied with BIK module considerations and how to calculate the benefit value. There are a number of other articles to assist with preparing and processing benefits in the BIK module:
- For creating this benefit type at company level, go to Configuring Company Benefits
- For applying benefits to employee records, go to Applying Benefits to Employees: Manual & Data Imports
- For how this looks in Payroll when processing, go to How Payrolled Benefits are Reflected in Payroll
- For National Insurance and Best Practices, please read the National Insurance and Income Tax Handling for Payrolled Benefits article
Contents
BIK Module Configurations and Considerations
Qualifying Relocation Expenses Payments and Benefits is captured in the BIK module via a single event type: “Automatically Handled.” This reflects that there is only one possible outcome for qualifying relocation payments: payrolled Income Tax across the year and Class 1A National Insurance via P11D(b). No alternative event types exist for non-qualifying or excess payments; these must be handled separately.
Key points for configuring and processing this benefit:
Exemption limit: Employers must determine the total value of qualifying relocation expenses up to £8,000 per employee. This is the maximum amount that can be recorded as exempt.
Entering the benefit value: The BIK module currently requires the user to manually enter the benefit value representing the qualifying amount. The system does not automatically calculate whether payments qualify or whether any amounts exceed the exemption limit.
Payroll interaction: Once the value is entered, the system will apply payrolled Income Tax across the year and Class 1A NIC at year-end via P11D(b). No additional configuration is needed for the automatic handling of this event type.
Tracking excess or non-qualifying amounts: If the total payments exceed £8,000 or fail to meet HMRC’s qualifying criteria, the excess must be recorded under a different taxable benefit type, such as Payments Made on Behalf of Employee or Expenses payments made on behalf of the employee, and processed accordingly.
Qualifying Relocation Expenses is technically treated as a one-off event, not a time based benefit held over a period of time (Such as a Health plan/medical benefit). The full taxable value arises at the point of transfer and should not be reduced based on duration.
Company-Level Configuration
When configuring this benefit at company level:
Set the benefit to retain until the end of the tax year for leavers to ensure the taxable value is always fully applied.
Since this is a single transaction, do not configure pro-rating based on duration of employment.
Employee-Level Configuration
When configuring this benefit at employee level, within the current version of the BIK module, Benefit Start and Benefit Stop dates are used to calculate pro-rated values. While this logic is appropriate for ongoing benefits, it does not automatically align with the treatment of one-off events.
Enter the full value of the payment as the benefit value
Set the Benefit Start and Benefit Stop dates to the full tax year to avoid incorrect pro-rating.
With this configuration, even if the employee leaves, the full taxable value of the payment will be taxed correctly.
Ongoing Enhancements
The current release of the BIK module fully supports compliant processing of this benefit type for income tax purposes. While certain behaviours, such as date-based pro-rating, require deliberate configuration for this benefit type, the correct legislative outcome can be achieved through the setup approach outlined above.
Employers can therefore operate this benefit accurately by applying the prescribed configuration.
Future enhancement phases will further refine benefit-specific behaviour to reduce manual intervention, increase automation, and more closely reflect the distinct legislative treatment of one-off benefit events such as Assets Transferred.
Event Type: Automatically Handled
This event type covers situations where an employer provides qualifying relocation expenses to an employee and the payments meet HMRC’s criteria for exemption. Because this event type has only one outcome, the system applies payrolled Income Tax across the year and Class 1A National Insurance via P11D(b).
Income Tax Liability |
National Insurance Liability |
Payrolled, across the Tax Year |
Class 1A (Employer Only), P11D(b) |
Working out the Taxable Amount
Employers must determine the value of qualifying relocation expenses up to the £8,000 statutory exemption limit. The taxable benefit is only relevant if the payment exceeds this limit, in which case the excess must be treated as a separate taxable benefit using another event type.
Steps to calculate the benefit value:
Total all qualifying relocation expenses for the employee (removal costs, estate agent/legal fees, travel costs, etc.).
Using the total, minus off the £8,000 limit
The excess is treated as the taxable benefit. If the total is £8,000 or less, no taxable benefit arises.
Enter the excess amount as the benefit value in the BIK module
For example:
An employee relocates for a new role, and the employer covers the following qualifying costs:
Removal company fees: £2,500
Estate agent fees: £3,000
Legal fees: £1,500
Travel costs for employee and dependants: £1,500
Total qualifying expenses: £8,500
Step 1: Apply the exemption limit
Maximum exempt amount: £8,000
Amount exceeding the exemption: £500
Step 2: Enter benefit in the BIK module
Benefit value entered: £500
Step 3: Payroll treatment
The system will apply Income Tax payrolled across the year.
Class 1A NIC is calculated and reported at year-end via P11D(b).
Important Note: This event type assumes the employer has confirmed that all costs fall within HMRC’s qualifying criteria. Any non-qualifying or excess payments must be handled separately as taxable benefits.
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