Travel expenses 17th November 2013

Posted in: Personal Tax

So you work for someone and there’s a lot of travelling involved. You have to travel to your place of work in the mornings and back again in the evenings. Sometimes, during the day to have to travel to see clients.

Maybe you’re an area manager and you don’t have any regular place of work – every day is different.

Can you claim your travel expenses?

There’s a general rule that must be applied to determine if an expense can be a deduction from taxable earnings and that is the “wholly, exclusively and necessarily” rule. The expense must have been incurred wholly, exclusively and necessarily in the performance of the duties.

The biggest obstacle here is the word “necessarily”. HMRC will ask could the job have been performed without incurring that particular expense? If the answer is yes then good luck with claiming that expense.

So what about travel expenses?

First the expenses have to be necessarily incurred or attributable to the employee’s necessary attendance at any place in the performance of their duties of employment.

Great – I can claim my travel expenses to and from work in the morning? Unfortunately not. There is a specific exclusion for “expenses of ordinary commuting”.

Ordinary commuting in this context means travel between:

  • the employee’s home and a permanent workplace; or
  • a place that is not a workplace (e.g. a hotel) and a permanent workplace

Notice that this rules out going from somewhere to a permanent workplace. However, once at that workplace, if you have to leave to travel to a client’s then any expenditure incurred can be claimed as a deduction against taxable earnings.

What’s this thing about a permanent workplace?

HMRC make a distinction between a permanent workplace and a temporary workplace.

A temporary workplace is one an employee attends in the performance of his duties and is of limited duration. A workplace will not be temporary if the employee attends for a period of continuous work lasting more than 24 months.

If your employer asks you to work elsewhere for say 6 months (another office or branch), then that is a temporary workplace and you can claim your travel expenses as a deduction against your taxable earnings. Your duties must be performed to a significant extent at the temporary workplace – here significant extent is 40% or more of your time.

It’s possible for a temporary workplace to become a permanent workplace if either:

  • the period of continuous work at that location exceeds 24 months; or
  • it becomes apparent the absence from the original permanent workplace will exceed 24 months.

In this case, only the travel costs up to the point of change are deductible expenses.

So if your employment contract is for less than 24 months, can you claim a deduction for travelling expenses? No sorry. In this scenario a deduction will be denied.

What of our area manager? Unfortunately if that’s you, you’re probably out of luck. HMRC will likely consider an “area” to be a permanent workplace.

What about site based employees who travel to various sites to perform their duties but have no permanent workplace. You’re in luck. This is similar to visiting clients in the performance of your duties. Provided your attendance at the site is for no more than 24 months, your travel costs are deductible.

Let’s look at an example.

Edward lives in a small village just outside Nottingham and works in Nottingham 5 days a week. One day Edward’s employer tells him he will need to work in their Leeds office one day a week for the next three years.

Can Edward claim his travel expenses between Nottingham and Sheffield? On the face of it, it looks like he can’t as the duration is for more than 24 months.

However, it is only one day a week out of his usual 5 day working week. So that is 20% of his time. Therefore he is not performing his duties to a significant extent in Sheffield and the 24 month rule does not apply. Edward can claim his travel costs. After all, what’s the difference between this and travelling to a client’s once a week or once a month or once a year?