Employee travel expenses
Why is travel a complicated area?
Because the distinction between when a journey is “business” and when it’s “private” can get incredibly blurred.
And if an employer pays for an employee’s private travel, there’ll almost inevitably be extra tax and/or NIC to pay.
It’s important to note here that “business travel” can include:
- The transport costs, e.g. train fare, air fare, taxi fare
- Subsistence costs that are incurred while the employee is travelling, e.g. a meal at the airport, or a cup of coffee and a pastry at the station Caffe Ritazza
- Accommodation, if the travel needs an overnight stay
HMRC won’t restrict the claim to the cheapest form of travel or accommodation available. So it’s OK to claim for a plane ticket as opposed to a coach ticket. Many employers may make rules about what they’ll pay for, for example that they’ll pay for standard-class train tickets rather than first-class tickets, but HMRC aren’t that mean!
It's the end of the tax return as we know it! Find out about HMRC’s Making Tax Digital plan and how it will affect you with our free guide.
HMRC treat business mileage travelled in an employee’s own car slightly differently to other travel. So long as the mileage reimbursement is equal to, or less than, HMRC’s approved mileage payments, the employer doesn’t even have to report that mileage on form P11D far less pay any extra tax or NIC.
But just what is “business travel”?
Here’s a summary of the rules for when a journey qualifies as “business” and when it doesn’t.
“What counts as business travel?”
HMRC say in summary:
Business travel only covers the following two types of journey:
- journeys forming part of an employee's employment duties (such as journeys between appointments by a service engineer or to external meetings)
- journeys related to an employee's attendance at a temporary workplace
They also provide a detailed factsheet.
No relief for ordinary commuting
If an employer reimburses an employee for what HMRC call “ordinary commuting”, then both the employer and employee will have more money to pay over to HMRC in tax and/or NIC.
“Ordinary commuting”, according to HMRC, is:
“Any travel between a permanent workplace and home, or any other place which is not a workplace.”
Travel between two workplaces is business travel.
But any travel between the permanent workplace and an employee’s home, or somewhere else the employee visits for non-work reasons (and non-work includes the employee doing another job for another employer) is not business travel.
“Travel”, includes subsistence and accommodation as above.
And “any travel” really does mean any travel, even when you think it might be OK.
For example, if I stay over in Edinburgh on a weeknight because Ed asks me to attend a meeting which is due to start early the following morning, earlier than I could arrive on the first train from my home-town, Carlisle - I can’t claim the cost of my hotel stay, because it still counts as ordinary commuting. It doesn’t matter that my employer has asked me to stay.
Even a late-night journey to work to switch off a ringing burglar alarm would still be ordinary commuting.
There are only a few limited exceptions, like some late-night taxis home.
What isn’t a permanent workplace
HMRC look at how much of an employee’s time is spent at a particular workplace and whether they’re regularly there. So somewhere an employee goes once a week is nearly always still a permanent workplace.
A workplace becomes a temporary workplace if the employee goes there only for a short-term task. Travel to and from a temporary workplace is business travel, not ordinary commuting.
The employee can still go there on more than one occasion, if the task isn’t going to be long-term.
By definition from HMRC, if the task is going to last more than 24 months and the employee is going to spend more than 40% of their time on site, the workplace where the task is carried out becomes permanent.
When an employee works from home
If the employee works from home simply because it’s convenient for them to do so, then any home-to-work journeys are ordinary commuting.
But if the employee works from home because the job requires them to, e.g. the employer doesn’t provide the necessary facilities on site, then “home” becomes a workplace, and travel to other workplaces becomes business travel.
So you can see there are a lot of complications. Do check HMRC's website carefully and ask your accountant if you're in any doubt.
Disclaimer: This article is no substitute for professional advice for your specific situation.
- Turning over a new leaf: tips for organising your bookkeeping in autumn
- MTD for Income Tax: next steps for sole traders
- Hack to the future: how hack days inspire creativity at FreeAgent
- Video: self-employed business expenses by HMRC
- Finance Bill 2017-19: Making Tax Digital back on the agenda