By Aaron Hemmington
Hawsons
TRAVELLING and subsistence expenditure incurred by or on behalf of employees gives rise to many problems. Highlighted below are the main areas to consider in deciding whether tax relief is available on travel and subsistence.
Many employees have a place of work which they regularly attend and make occasional trips out of the normal workplace to a temporary workplace. Often an employee will travel directly from home to a temporary workplace and vice versa. An employee can claim full tax relief on business journeys made.
A business journey is one which either involves travel:
– from one place of work to another or
– from home to a temporary workplace or
– to home from a temporary workplace.
Journeys between an employee’s home and a place of work which he or she regularly attends are not business journeys. These journeys are ‘ordinary commuting’ and the costs of these have to be borne by the employee. The term ‘permanent workplace’ is defined as a place which the employee ‘regularly’ attends. It is used in order to fix one end of the journey for ordinary commuting. Home is the normal other end of the journey for ordinary commuting.
Subsistence payments
Subsistence includes accommodation and food and drink costs whilst an employee is away from the permanent workplace. Subsistence expenditure is specifically treated as a product of business travel and is therefore treated as part of the cost of that travel.
Anti-avoidance
Some travel between a temporary workplace and home may not qualify for relief if the trip made is ‘substantially similar’ to the trip made to or from the permanent workplace. ‘Substantially similar’ is interpreted by HMRC as a trip using the same roads or the same train or bus for most of the journey.
Temporary postings
Where an employee is sent away from his permanent workplace for many months, the new workplace will still be regarded as a temporary workplace if the posting is either:
– expected to be for less than 24 months, or
– if it is expected to be for more than 24 months, the employee is expected to spend less than 40 per cent of his working time at the new workplace. The employee must still retain his permanent workplace.
Travelling appointments
For some employees, travelling is an integral part of their job. For example, a travelling salesman who does not have a base at which he works, or where he is regularly required to report. Travelling and subsistence expenses incurred by such an employee are deductible.
Home-based employees
Some employees work at home occasionally, or even regularly. This does not necessarily mean that their home can be regarded as a place of work. There must be an objective requirement for the work to be performed at home rather than elsewhere. This may mean that another place becomes the permanent workplace. For example, an office where the employee ‘regularly reports’.
Therefore, any commuting cost between home and the office would not be an allowable expense. But trips between home and temporary workplaces will be allowed. If there is no permanent workplace then the employee is treated as a site-based employee. Thus all costs would be allowed including the occasional trip to the employer’s office. The home may still be treated as a workplace under the objective test above. If so, trips between home and any other workplace in respect of the same employment will be allowable.
How we can help
Full tax relief can be given for travel and subsistence costs but there are borderline situations. We can help you to decide whether an employee can be paid expense payments which are covered by tax relief and do not result in a taxable benefit. Please note that if you do make payments for which tax relief is not available, there may be PAYE compliance problems if the payments are made free of tax.
Contact Aaron Hemmington at Hawsons Chartered Accountants on 01604 645600 or email if you require advice whether payments can be made to employees tax free.