Employee travel expenses
Travel is quite a tricky area for expenses, but it's one that affects a lot of employees. To help you understand more about what you can and can't claim as expenses when it comes to travel here's a quick run-through of the rules.
Why is travel a complicated area?
The main reason is that the distinction between when a journey is "business" and when it's "private" can get incredibly blurred.
Another reason is that if an employer pays for an employee's private travel, there'll almost inevitably be extra tax to pay.
What exactly counts as business travel?
HMRC say in summary that 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 on employee travel expenses.
Here are the rules around business travel in brief:
No expenses for travelling to and from work
If an employer reimburses an employee for what HMRC call "ordinary commuting" both the employer and employee will have more money to pay over to HMRC in tax. Ordinary commuting, according to HMRC, is any travel between a permanent workplace and home, or any other place which is not a workplace. That means that claiming travel expenses from home to work is not usually acceptable in HMRC's eyes.
Travel between two workplaces is business travel
If an employee has to pay for travel between different office spaces, for example, then any travel costs can be claimed as expenses.
No expenses for "non-work" travel
Any travel between the permanent workplace and somewhere else the employee visits for non-work reasons is not business travel. Non-work includes the employee doing another job for another employer
Travel includes subsistence and accommodation as above
If the business travel includes an overnight stay then the costs incurred for this can be claimed for. You can also claim for subsistence costs incurred during business travel, for example, a meal at the airport.
Subsistence and accomodation costs for ordinary commuting
If you stay over in Edinburgh on a weeknight because you've been asked to attend a meeting which is due to start early the following morning, you can't claim the cost of your hotel stay because it still counts as ordinary commuting. It doesn't matter that my employer has asked you to stay.
Even a late-night journey to work to switch off a ringing burglar alarm would still count as ordinary commuting.
There are only a few limited exceptions, like some late-night taxis home.
Restrictions on costs
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 bus ticket. Hoever, many employers may make rules about what they'll pay for, for example, that they'll pay for standard-class train tickets but not first-class tickets.
Employee expenses for travel in their own car
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 or pay any extra tax or National Insurance contributions (NICs). Find out more about claiming mileage in our guide to mileage rates and thresholds.
What counts as a workplace for business travel?
HMRC look at how much of an employee's time is spent at a particular workplace and whether they're regularly there. For example, somewhere an employee goes once a week is nearly always a permanent workplace. 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.
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. That means that you can claim expenses for business travel between both permanent and temporary workplaces.
Travel expenses when you work from home
If an employee works from home simply because it's convenient for them to do so, then any home-to-work journeys count as ordinary commuting.
But if an employee works from home because the job requires them to, for example, if their employer doesn't provide the necessary facilities on site, then "home" becomes a workplace and travel to other workplaces becomes business travel.
You can see from the information above that there are a lot of complications when it comes to claiming expenses for business travel. This guide is no substitute for professional advice for your situation, so make sure that you check HMRC's website carefully and ask your accountant if you're in any doubt.
Self employed? Find out more abouting claiming travel expenses as a self-employed business owner.
Disclaimer: The content included in this guide is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this guide. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.