Appealing HMRC On Your Job Expenses And Benefits: An Employee's Guide

A letter from HMRC has landed and it says you owe tax you did not expect. Maybe it has clawed back the job expenses you claimed—the mileage, the working-from-home costs, the professional fees—and wants the refund returned, perhaps with a penalty. Maybe it is taxing a company car, a cheap loan, or another workplace benefit your tax code never caught up with. Or maybe you were made redundant, received a lump sum, and HMRC is taxing part of it despite the "first £30,000 is tax-free" you were promised.

Take a breath. You are a PAYE employee—a nurse, a teacher, a tradesperson, an office worker who went hybrid—and tax has always "just happened" through your payslip. Now it has not, and that is unsettling.

Here is the honest picture this guide gives you. There are real defences, and some claims genuinely win. But the deduction rules for employees are stricter than almost anyone expects—the strictest in the income-tax code—and being honest about that upfront is the kindest thing we can do. Many expense claims, especially the travel and working-from-home claims that refund agents push, cannot succeed. That is the law, not bad luck. The job of this article is to show you where the real fights are, and where they are not.

How Your Pay Is Taxed—And Why PAYE Doesn't Settle It

Your employment income is taxed as earnings. The law defines earnings widely (s.62 ITEPA 2003): not just salary, wages and fees, but "any gratuity or other profit or incidental benefit" worth money or convertible into money. That last part is why benefits in kind—a company car, private medical cover, a cheap loan—are taxable even though no cash changed hands.

For most employees, tax is collected as you earn through PAYE. Your employer applies a tax code—a cumulative estimate of your allowances—and deducts tax each payday. The crucial point is that PAYE is only a collection mechanism. It is HMRC's best guess in advance; it does not finalise what you owe. If the code collected too little or too much, HMRC reconciles after the tax year ends.

That year-end reconciliation arrives in one of two forms. A P800 is an informal calculation HMRC sends when PAYE has under- or over-collected; it is a starting point to check, not a demand to pay blindly. A Simple Assessment is a formal instrument HMRC can use to assess you without a full tax return. Most pure-PAYE employees never file a Self Assessment return at all.

You get pulled into Self Assessment if your affairs are more complicated—higher- or additional-rate complications, untaxed income, certain benefits—or if HMRC simply issues you a notice to file (s.8 TMA 1970). If you are in Self Assessment, your employment pages report your pay, tax, benefits and any expense claims, and HMRC's enquiry weapon is a formal enquiry under s.9A leading to a closure notice—covered in our guide to HMRC enquiries and closure notices.

The Harsh Test That Catches Employees

This is the part to understand before anything else, because it explains why so many expense claims fail.

An employee can only deduct an out-of-pocket expense if it meets the general rule in section 336 ITEPA 2003. The expense must be one the employee is "obliged to incur and pay as holder of the employment," and the amount must be incurred "wholly, exclusively and necessarily in the performance of the duties of the employment."

Compare that with the test a self-employed person or a landlord enjoys. Their expenses are deductible if incurred "wholly and exclusively" for the business—the test we explain in our landlord's guide to rental income. The employee has to clear that bar and two more, and those two extra words are where most claims die:

• "Necessarily" is an objective test. It is not enough that your employer asked you to incur the cost, or that it was sensible, or that it helped you do the job better. The question is whether every single holder of your job—not just you, in your circumstances—would have to incur it. This is the principle the courts set down a century ago in Ricketts v Colquhoun, where a barrister who was also a part-time Recorder could not deduct his travel and hotel costs from London to the court at Portsmouth: the expense flowed from his personal choice of where to live, not from the office itself. HMRC restates that principle in its Employment Income Manual at EIM31641.
• "In the performance of" the duties means while you are actually doing the job, not merely to put yourself in a position to do it. Expenses that enable or prepare you to perform your duties do not count, however essential they feel.

This second hurdle is exactly what sank the most relatable recent case. In HMRC v Kunjur [2023] UKUT 154 (TCC), a junior maxillofacial doctor at a London hospital rented a flat nearby so he could meet his on-call commitments, and tried to deduct the rent. The First-tier Tribunal had allowed a small slice of it. The Upper Tribunal—the higher court—overturned that and refused the deduction entirely, holding that the rent "simply put him in a position to do the work he was employed to do." It enabled the duties; it was not incurred in performing them.

HMRC's own manual calls these tests "stringent and exacting." The tribunal has gone further. In Victor Michael v HMRC [2026] UKFTT 96 (TC), where a registered nurse claimed mileage, food, laundry, shoes and a computer, the tribunal recorded that the section 336 conditions are "notoriously rigid, narrow and restricted in their operation" and dismissed almost the entire claim.

None of this means you should give up. It means you should aim your effort at the claims that can win—and there are several. The rest of this guide takes the three scenarios in turn.

Scenario A—HMRC Disallowed Your Expenses

If HMRC has opened up your years and clawed back an expenses refund, the items it disputes almost always fall into four buckets. Two are frequent losers; two contain genuine, winnable claims. Knowing which is which lets you concede the doomed parts and fight the rest, rather than surrendering everything or defending the indefensible.

Travel And The Temporary-Workplace Trap

Travel is where most readers lose, because the rules are precise and counter-intuitive. The legislation sits in sections 337 to 339 ITEPA. Three patterns matter:

• Home to your permanent workplace is "ordinary commuting"—never deductible. It does not matter how long the journey is, that you also work from home some days, or that your contract names home as a base. Ordinary commuting is explicitly excluded (s.338).
• Workplace to workplace during the working day is deductible—travel genuinely on the job (s.337).
• Home to a genuine temporary workplace is deductible—but only within limits (s.339).

The temporary-workplace rule is where the costly misunderstanding lives. A place is temporary if you attend it to perform a task of limited duration or for some other temporary purpose. But it stops being temporary—and your travel relief stops—once you expect to be there, or actually are there, for more than 24 months of continuous work.

The trap is treating 24 months as a floor that makes any shorter posting deductible. It is the opposite—a ceiling. A workplace you attend for less than 24 months can still be your permanent workplace, in which case the travel is ordinary commuting from day one. That is exactly what happened to the nurse in Victor Michael: the hospital was his permanent workplace even though he attended for under two years, so every one of those journeys was non-deductible commuting.

There is one travel claim that legitimately succeeds, and it is worth protecting. If you use your own car for genuine business journeys (not commuting) and your employer pays you less than the approved mileage rate, you can claim Mileage Allowance Relief for the shortfall (ss.229-236 ITEPA). The approved rates have long stood at 45p a mile for the first 10,000 business miles in the tax year and 25p a mile thereafter—check they are still current on GOV.UK before you calculate. This relief is real, but only for qualifying journeys—not the commute.

Professional Fees And Subscriptions

This is one of the easier wins, and it is often disallowed wrongly in a bulk enquiry alongside a doomed travel claim. A statutory professional fee you must pay to practise your profession is deductible (s.343 ITEPA), and an annual subscription to a body on HMRC's approved "List 3" is deductible if it is relevant to your job (s.344 ITEPA).

So a nurse's NMC registration, a doctor's GMC fee, a solicitor's SRA practising certificate, a teacher's relevant professional association—these are generally allowable. The one hard rule: the body must actually be on List 3. If it is not, the subscription is not deductible no matter how job-relevant it feels. You can check the live List 3 on GOV.UK.

The practical lesson: if HMRC has lumped your genuine subscriptions in with a travel claim it is disallowing, split them out and defend the subscriptions on their own footing rather than conceding the lot.

Working From Home

This is the single fact most likely to be got wrong, because almost every guide online is now out of date. For employees, the working-from-home deduction has been withdrawn from 6 April 2026.

Up to and including 2025-26, an employee whose employer did not pay them could try to deduct their own unreimbursed extra household costs—though even then only under the brutal section 336 test, which HMRC treated as denying relief where you work at home by choice (most hybrid workers). From 6 April 2026 onwards that employee deduction is gone: for the current tax year you generally cannot claim it at all. You may still be able to claim for earlier years if you genuinely qualified then.

What survives is the employer side. Under section 316A ITEPA, there is no tax charge where an employer pays or reimburses an employee for reasonable additional household costs of homeworking. The familiar £6 a week figure is HMRC's administrative amount an employer may pay tax-free without the employee having to evidence the actual cost—it is not a sum the employee can now claim back from HMRC themselves. If your employer is reimbursing you, that remains exempt; if you are paying out of your own pocket, the relief for the current year is no longer there.

Tools And Uniform Flat-Rate Expenses

If you are responsible for maintaining your own tools or laundering specialist uniform, you may be able to claim a flat-rate deduction—an agreed annual amount by trade, claimable without receipts (s.367 ITEPA). These exist for trades like nurses, mechanics and joiners. They are legitimate, but modest—tens to low hundreds of pounds—and they do not cover ordinary clothing or commuting.

A warning here, because it is the source of so many disputes. Many "tax refund" claims that HMRC later unwinds began life as a refund agent bundling a legitimate small flat-rate expense with an illegitimate large travel or mileage claim, then taking a cut of the inflated refund. If that describes your situation, the flat-rate part may well stand while the travel part falls—again, the point is to separate the good from the bad.

If a refund agent filed a claim in your name that HMRC is now unwinding, three things are worth knowing, because the worry behind this letter is usually "am I in trouble?". First, an honest but mistaken claim is a careless inaccuracy, not an accusation of fraud—any penalty is a percentage of the extra tax (broadly up to 30% where you were careless), reduced the more promptly and fully you put it right. Second, you are legally responsible for your own return even when an agent completed it, so "the agent did it" is not, by itself, a reasonable excuse—do not bank on that defence. Third, HMRC reclaims the whole refund, including the slice the agent kept as commission, so you can be left out of pocket for money you never actually received. Engaging an agent is not the problem; the fix is to put the record straight and claim only what genuinely qualifies.

Scenario B—A Benefit-In-Kind Assessment

If your letter is about a benefit in kind—a company car, a cheap loan, living accommodation, private medical insurance—the dispute is usually less about whether it is taxable (most are) and more about the value and how it crept up on you.

Here is the mechanism. Most benefits are reported by your employer after the tax year on a form P11D. Your employer pays employer National Insurance on the benefit value—Class 1A, currently 15%—and your tax code is adjusted to collect the tax from you, often a year in arrears. That lag is why a benefit charge can quietly build up before anyone notices, and why you can suddenly face arrears for several years at once. (Real-time payrolling of benefits will eventually replace much of the P11D system, but mandatory payrolling has been delayed to 6 April 2027—it is not compulsory now, and loans and living accommodation will stay on P11D even after that.)

You do not need to master the whole benefits code, but a few de-minimis lines are worth knowing because they decide whether there is any charge at all:

• Cheap or interest-free loans: no benefit charge at all if the total you owe across all such loans never exceeds £10,000 at any point in the tax year (s.180 ITEPA). Above that, the charge is the difference between HMRC's official rate of interest—currently 3.75%, though it is reviewed regularly, so check the current figure—and any interest you actually paid.
• Living accommodation: there is a basic charge, and an additional charge on top if the property cost more than £75,000 (s.106 ITEPA).
• Trivial benefits: small perks costing up to £50 each are exempt, provided they are not cash, not contractual and not a reward for work (s.323A ITEPA). Directors of close companies have an annual cap of £300.

Company cars, vans and fuel are charged on a more elaborate basis (broadly, the car's list price multiplied by a percentage that rises with CO2 emissions, with a separate fuel charge). The annual figures—such as the fixed multiplier used for the fuel benefit—are set each year by regulations, so do not rely on a number you read somewhere; check the current figure for the tax year HMRC is assessing.

The discovery angle—this is the one that can win. If the benefit was on a P11D your employer actually filed, then HMRC had the information all along. Where HMRC is now raising a discovery assessment under s.29 TMA for a benefit that was disclosed, a real question arises: could a properly informed HMRC officer reasonably have been expected to be aware of the under-assessment from the information made available? That is the s.29(5) test, and it is exactly what our guides to discovery assessments and Langham v Veltema unpack. Discovery has its own gateways and time limits—broadly 4 years to reach back as standard, 6 years where the under-assessment was careless, and 20 years where it was deliberate—and an assessment that should never have been made on discovery grounds, or that reaches back further than the law allows, can be knocked out even if the tax was, in principle, due.

Scenario C—A Termination Payment Over £30,000

If you were made redundant or settled an employment dispute and received a lump sum, you have probably heard that "the first £30,000 is tax-free." That is a half-truth, and it is where the dispute usually lives.

It is true that a genuine termination award—a true redundancy or ex-gratia element—is only taxed to the extent it exceeds £30,000 (s.403 ITEPA). The £30,000 figure itself is rarely the fight. The fight is over how each slice of your payment is characterised.

The big change is Post-Employment Notice Pay (PENP). Since 6 April 2018 (ss.402A-402E ITEPA), the part of a settlement that represents the basic pay you would have earned during any notice period you did not work is treated as ordinary earnings—taxed in full, with no £30,000 exemption and subject to National Insurance. This applies even if your contract had no pay-in-lieu-of-notice clause, which closed the old planning that simply re-labelled notice pay as a tax-free termination payment.

So before you assume £30,000 is shielded, check what is not exempt: contractual pay in lieu of notice, holiday pay, outstanding bonuses, and any "earnings" dressed up as a termination payment. On a real settlement, very little may actually fall within the £30,000. The battleground is the wording of the settlement agreement and your contract, item by item—not the headline number.

How These Disputes Reach You—And The Appeal Route

Before the appeal mechanics, the single most important trap for employees: you cannot appeal your tax code to the tribunal.

A PAYE code is a provisional estimate, not a decision. If it is wrong—a benefit you no longer have, an estimated underpayment you dispute—you fix it administratively: through your Personal Tax Account, by phone, or through your employer. The First-tier Tribunal is a creature of statute with no general "fairness" or judicial-review power, so there is simply no such thing as appealing your tax code to it—the limit our analysis of Hok v HMRC explains. What you can appeal is the assessment that eventually crystallises any underpayment. Aim at the assessment, not the code.

That assessment comes in one of three shapes:

• A P800. Not itself an appealable decision—it is a calculation to check, not pay blindly. An underpayment is usually coded out or formalised into an instrument that does carry appeal rights. Query errors before it hardens.
• A Simple Assessment. You have 60 days to query it as incorrect (s.31AA TMA 1970): you tell HMRC it "is or may be incorrect," with reasons, and HMRC must give a final response—confirm it, issue an amended Simple Assessment that supersedes the original, or withdraw it. The amended assessment is then itself appealable under s.31.
• A closure notice or discovery assessment. If you are in Self Assessment, HMRC enquires and then closes the enquiry; if you are pure PAYE and a benefit was never taxed, HMRC's route is a discovery assessment—with the s.29 conditions and time limits discussed above.

Once you have an appealable assessment or penalty, the mechanics are the standard ones. You appeal in writing within 30 days of the decision (s.31 TMA). You can ask for a free HMRC statutory review by a different officer, completed within 45 days, and—review or not—you can notify the First-tier Tribunal. On the amount of an assessment the burden of proof is on you to show it is excessive (s.50(6) TMA), so your evidence does the heavy lifting—our guide to writing grounds of appeal shows how to structure it.

If there is also a penalty—for a careless or deliberate inaccuracy, or a failure to notify—it is separately appealable, and you may have a reasonable excuse defence to the penalty (though not to the tax). See what counts as a reasonable excuse and reducing HMRC penalties, and—where the dispute is over self-assessment filing and benefits—self-assessment penalties.

One more figure to build into your sums: interest. Late-payment interest runs on underpaid tax from the date it was originally due—currently 7.75%—and it keeps running while you appeal, so across several back years it can add a real amount on top of the tax and any penalty. Interest is not itself a penalty and there is no separate appeal against it; our guide to interest on unpaid tax explains how it is charged.

Check Who HMRC Is Assessing

One factual point that is easy to miss and occasionally decisive: a failure to operate PAYE properly, or to tax a benefit, is often legally the employer's liability, not yours.

Under the PAYE regulations (SI 2003/2682), HMRC's normal route for unpaid PAYE is a Regulation 80 determination served on the employer, which the employer appeals. HMRC can only shift recovery to you by a formal Regulation 72 direction, and only in specific circumstances—broadly, where the employer's failure to deduct was an error made in good faith despite taking reasonable care, or you received the pay knowing the employer wilfully failed to deduct. If you are facing a demand for "PAYE the employer should have deducted," check who is actually being assessed. For a pure operate-PAYE failure, being made the debtor personally without a valid Regulation 72 direction is open to challenge.

What To Do Now

1. Check the assessment, not the code. There is no tribunal appeal against a tax code—fix that administratively. Identify the appealable instrument (the Simple Assessment, closure notice or discovery assessment) and the deadline on it.
2. Split the good claims from the bad. Concede the doomed travel and working-from-home claims if they cannot meet section 336, and defend the genuine ones—List 3 subscriptions, real temporary-workplace travel, mileage allowance relief, modest flat-rate expenses—on their own footing.
3. Gather your evidence. P11Ds for benefits; your contract and the settlement agreement for a termination dispute; mileage logs, receipts and your employer's reimbursement policy for expenses. On the amount, the burden is on you.
4. Meet the 30 days deadline. Appeal in writing within 30 days of the decision; diary it. If the window has passed, a late appeal is still possible but the tribunal applies a strict test.
5. Consider a statutory review. A free second look by a different officer within 45 days can resolve many disputes without a hearing, and you keep the right to go to the tribunal afterwards.
6. Get help if you are unsure. Free help is available from TaxAid (taxaid.org.uk) and the Low Incomes Tax Reform Group (litrg.org.uk); a Chartered Tax Adviser or accountant can be engaged for a single piece of work.

For the bigger picture of how any HMRC dispute unfolds, see our tax dispute timeline. And the broader lesson from the cases is consistent—in Dr Nduka v HMRC [2023] UKFTT 420 (TC), where a doctor claimed a long list of expenses, the tribunal allowed the appeal in part, sorting deductible from non-deductible item by item. Some claims succeed; most do not; evidence and the right legal test decide which.

Key Legislation And Resources

Legislation

• Section 62, ITEPA 2003—the meaning of "earnings"
• Section 336, ITEPA 2003—the general deduction rule ("wholly, exclusively and necessarily")
• Sections 337-339, ITEPA 2003—travel deductions, ordinary commuting and the temporary-workplace rule
• Sections 343-344, ITEPA 2003—professional fees and List 3 subscriptions
• Section 367, ITEPA 2003—flat-rate deductions for tools and uniform
• Section 316A, ITEPA 2003—tax-free employer payments for homeworking
• Section 180, ITEPA 2003—the £10,000 beneficial-loan de-minimis; and section 106 (living accommodation over £75,000) and section 323A (£50 trivial benefits)
• Sections 402A-402E and section 403, ITEPA 2003—Post-Employment Notice Pay and the £30,000 termination threshold
• Section 31, TMA 1970 and section 50(6)—right of appeal and the burden of proof on the amount
• Section 31AA, TMA 1970—the 60-day right to query a Simple Assessment; and section 29 (discovery assessments)
• Income Tax (PAYE) Regulations 2003, SI 2003/2682—Regulation 80 (determination on the employer) and Regulation 72 (recovery from the employee)

Key Cases

• HMRC v Kunjur [2023] UKUT 154 (TCC)—a junior doctor's flat rent "simply put him in a position to do the work"; deduction refused (the "in the performance of the duties" hurdle)
• Victor Michael v HMRC [2026] UKFTT 96 (TC)—a nurse's mileage and expense claims refused; section 336 "notoriously rigid, narrow and restricted"; an under-24-month workplace can still be permanent
• Dr Nduka v HMRC [2023] UKFTT 420 (TC)—a long list of doctor's expenses, allowed in part; the tribunal sorting deductible from non-deductible item by item

The objective-necessity principle—that the test asks whether every holder of the job must incur the cost, not whether you chose to—traces to Ricketts v Colquhoun; the narrow circumstances in which home-to-work travel can ever be deductible are illustrated by Pook v Owen and Taylor v Provan; and the point that "preparing to perform is not performing" runs through Smith v Abbott. HMRC restates each in its Employment Income Manual, and the Upper Tribunal applied the line of authority in Kunjur.

HMRC Guidance

• EIM31630: the general deduction rule, key words and phrases and EIM31641: Ricketts v Colquhoun
• EIM32075: temporary workplace and EIM32080: the 24-month rule
• EIM32880: professional fees and subscriptions and the approved professional bodies (List 3)
• EIM01472: homeworking household expenses and the employee-facing working at home guidance (confirming withdrawal from 6 April 2026)
• EIM26100: beneficial loans, EIM11401: living accommodation, EIM21864: trivial benefits
• EIM13000: termination payments and EIM13874: Post-Employment Notice Pay
• Employee entry points: claim tax relief for job expenses, tax on company benefits, Simple Assessment

On This Site

• Appealing HMRC on rental income—the easier "wholly and exclusively" test for landlords, and the natural contrast with the employee rules
• Discovery assessments and Langham v Veltema—the s.29 route and whether HMRC was "aware" of a P11D'd benefit
• HMRC enquiries and closure notices—for Self Assessment employees
• Hok v HMRC—why you cannot appeal a tax code or ask the tribunal to "be fair"
• IR35 and off-payroll appeals and PGMOL v HMRC—where whether you are an employee is itself in dispute
• What is a reasonable excuse?, Perrin v HMRC, reducing HMRC penalties and self-assessment penalties—the penalty leg
• Understanding your HMRC appeal rights, HMRC internal review, how to appeal to the tax tribunal, writing grounds of appeal and late appeal to the tax tribunal
• Tax dispute timeline

This article is for informational purposes only and does not constitute legal or tax advice. For advice specific to your situation, consult a qualified tax adviser, accountant, or solicitor.