Travel costs make up a large part of necessary expenditure for many businesses and with the continued popularity of hybrid and flexible working it is important that allowable travel expenses reflect this.
HMRC has recently updated its guidance on ordinary commuting and private travel, adding a new section to clarify the rules on claiming tax relief for flexible and hybrid workers. The Clayton & Brewill team explains this guidance and employer options in the blog below.
What journeys can you not receive tax relief for?
The position has always been that an employee cannot receive tax relief for the cost of a journey which falls under the categories of ordinary commuting or private travel. These are defined as:
- Ordinary commuting – any travel between a permanent workplace and either home, any other place they visit for non-work reasons or any place where they perform the duties of another job
- Private travel – a journey between an employee’s home and any other place they do not have to be for work purposes, or any two places the employee does not have to be for work purposes
Working from home
When it comes to working from home, HMRC’s position is that even if the employee’s home is accepted as constituting a workplace, it does not mean that they are eligible for tax relief for the cost of travelling between their home and a regular workplace.
This is because where someone lives is usually a personal choice and so the cost of travelling from home is also a personal choice rather than a requirement of the job. If the employer provides appropriate working facilities or the employee works from home as a matter of choice then HMRC will not accept that home working is an objective of the job, therefore employees are not entitled to any tax relief.
Updated guidance for flexible and hybrid workers
HMRC has recently updated its guidance on ordinary commuting and private travel to add a new section clarifying that tax relief will not be available for travel between home and the office for flexible and hybrid workers.
It says: “Modern information and communications technology has allowed many more employees to work from home on a flexible or hybrid basis. Under such arrangements, the employee will have a base office and journeys from home to that location will be ordinary commuting.”
Employer options
While cases may differ, the guidance is that employers do not need to provide tax relief for the travel of flexible and hybrid workers. Any relief they do provide will be personal choice on the basis of individual contracts.
If an employer does choose the reimburse travel costs, this should be put through payroll and taxed as additional salary. If the employer pays the cost directly, this will typically be a benefit in kind instead.
If you are an employer thinking of covering your employees travel costs in any way, please do not hesitate to reach out to the team at Clayton & Brewill for expert advice and guidance.
