HC Deb 16 March 1993 vol 221 cc180-1

I turn now to another area where reform is long overdue—the tax treatment of job-related relocation expenses.

When a company asks its employees to move house, it may offer help with relocation expenses. Usually, that involves paying for the cost of the removals, but sometimes, if the move is to a more expensive area, the employer will also pay allowances towards the employee's higher living costs.

For the past 40 years, we have allowed employees to receive most of this help tax-free, provided the employee has sold his existing home—a condition which has been the subject of much criticism. That means that someone whose employer gives them as much as £25,000 might pay no tax on it at all. On the other hand, people who decide to move to find work and pay their own costs get no help whatsoever from the tax system.

I see a case for some measure of relief where employers help meet employees' removal expenses, but it is difficult, in my opinion, to find a convincing rationale for a system of tax relief whose effect is to give the biggest subsidy to those moving to the highest-cost areas. With these reliefs expected to cost the Exchequer no less than the staggering sum of £800 million this year, I believe that the time has come for reform.

I am therefore asking the Inland Revenue to withdraw the present extra-statutory concession which helps people moving to a more expensive area, and I propose to restrict relief on removal expenses to payments of up to £8,000 for people whose employers require them to relocate after 6 April this year. Under the new system, the existing home need no longer be sold to qualify for relief.

Although these changes come into effect immediately, they will not start to raise revenue until the year after—about £200 million in both 1994–95 and 1995–96.