Employment
issues (tax)
Travel
and Subsistence for Directors and Employees
Travelling
and subsistence expenditure incurred by or on behalf of employees
gives rise to many problems.
We highlight below the main areas to consider in deciding
whether tax relief is available on travel and subsistence.
Employees
with a Permanent Workplace
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.
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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.
Example 1
An employee usually commutes by car between home in York and
a normal place of work in Leeds. This is a daily round trip
of 48 miles.
On a particular day, the employee instead drives from home
in York to a temporary place of work in Nottingham. A round
trip of 174 miles.
The cost here is the cost of the travel undertaken (174 miles).
A deduction would be available for that amount.
Example 2
An employee who normally drives 40 miles in a northerly direction
to work is required to make a 100 mile round trip south to
a client's premises. His employer reimburses him for the cost
of the 100 miles trip.
A deduction would be available for that amount.
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 the Revenue 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% of his working time at
the new workplace.
The
employee must still retain his permanent workplace.
Example 3
Edward works in New Brighton. His employer sends him to Wrexham
for 1.5 days a week for 28 months.
Edward will be entitled to relief. Any posting over 24 months
will still qualify provided that the 40% rule is not breached.
Site-based
Employees
Some
employees do not have a normal place of work but work at a
succession of places for several days, weeks or months. Examples
of site-based employees include construction workers, safety
inspectors, computer consultants and relief workers.
A site-based employee's travel and subsistence can be reimbursed
tax free if the period spent at the site is expected to be,
and actually is, less than two years.
There are anti-avoidance provisions to ensure that the employment
is genuinely site-based if relief is to be given. For example,
temporary appointments may be excluded from relief where duties
are performed at that workplace for all or almost all of that
period of employment. This is aimed particularly at preventing
manipulation of the 24 month limit through recurring temporary
appointments.
Other
Employees with no 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.
Please contact us if you require advice whether payments can
be made to employees tax free.
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For information of users: This material is published
for the information of clients. It provides only an overview
of the regulations in force at the date of publication, and
no action should be taken without consulting the detailed
legislation or seeking professional advice. Therefore no responsibility
for loss occasioned by any person acting or refraining from
action as a result of the material can be accepted by the
authors or the firm.
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