The short answer is no. As a basic rule, to be an allowable expense, travel must be either:
These conditions also apply to employees with flexible or hybrid working arrangements.
It is important to identify your type of workplace correctly. Tax law recognises two categories: the permanent workplace and the temporary workplace. Broadly speaking, travel from home to a temporary workplace is an allowable travel expense, whilst travel to a permanent workplace is not. It’s an area of considerable complexity where errors can often be made.
So, what’s the difference between the two? A permanent workplace is defined as a place an employee attends regularly for the performance of the duties of the employment. It is possible to have more than one permanent workplace at the same time.
In many cases, it will be clear if there is a permanent workplace. This will have important implications for the concept of ‘ordinary commuting’.
Ordinary commuting, in other words travel from home to a permanent workplace, is not allowable. There are certain, tightly-drawn exceptions. But, generally speaking, if an employee or director chooses where to work, and chooses where to live, the cost of travel to the permanent workplace does not attract tax relief. Should the costs of ordinary commuting be paid or reimbursed by the employer, this would usually create a taxable benefit.
Having established that an employee has a permanent workplace, and that the cost of ordinary commuting is not allowable, it is then possible to establish which travel costs are allowable.
In most cases, full tax relief is available on travel to and from a temporary workplace. A workplace is temporary if an employee goes there only to perform a task of limited duration, or for a temporary purpose. Even where a workplace fits into this category, other conditions can apply to mean it is treated as a permanent workplace instead:
Please note – some travel between a temporary workplace and home may not qualify for relief if the journey is ‘substantially similar’ to that to or from the permanent workplace. HMRC construes this as a journey using the same roads, or the same train or bus for most of the journey.
Special provisions apply to site-based employees, and employees for whom travelling is an integral part of the job, such as salespeople. Clayton & Brewill can advise further here, so please do get in touch if you have any queries.
Since the pandemic, homeworking is no longer a rarity. Hybrid working is now also increasingly common, and the tax treatment of travel expenses for employees coming into the office under such arrangements is a new area for most employers to get to grips with.
HMRC has recently updated its employment income manuals with more guidance on home and hybrid working; but this doesn’t mean any change to the way that the rules operate. Tax relief on travel for home or hybrid working arrangements will only be available in very specific circumstances.
This may come as an unwelcome surprise for employees who began homeworking during the pandemic, when easements applied to some homeworking expenses. Of course, an employer can choose to pay for, or reimburse such travel costs; but doing so is likely to create a benefit in kind, so reporting and compliance obligations will then also apply.
Hybrid workers face two challenges. There is the basic question of whether home qualifies as a workplace, and there are only very specific circumstances in which HMRC will accept that this is the case. Then there is the question of whether the employer’s normal workplace is their permanent workplace. If it is, then the ordinary commuting rules deny tax relief. Trips between home and temporary workplaces, however, will be allowed.
If working arrangements have changed within your business, it makes sense to check that employment contracts accurately reflect the new reality, and to adapt your expenses policy as needed. Clayton & Brewill can review this and advise on how the rules with regard to travel expenses impact you.