Travel and Subsistence for Directors and Employees

Understanding the rules surrounding travel and subsistence expenses for employees and directors is crucial for ensuring compliance with tax regulations. If you are an employer or employee in the Nottingham area, AHACCOUNTANTS can provide expert advice on these expense rules.

Key Areas to Consider for Tax Relief on Travel and Subsistence

Travel and subsistence expenditures incurred by employees can be complex, with various factors influencing whether tax relief is available. Below are the main areas to consider:

1. Employees with a Permanent Workplace

Many employees have a regular workplace and occasionally travel to temporary workplaces. Travel from home to a temporary workplace can qualify for tax relief.

• Business Journey Definition: A business journey includes travel:
  • From one workplace to another
  • From home to a temporary workplace
  • From a temporary workplace back to home

Journeys between an employee’s home and their regular place of work are considered ordinary commuting, and costs for these trips cannot be claimed as tax-deductible.

Example 1:
An employee commuting from York to their regular workplace in Leeds (48 miles round trip) travels to a temporary workplace in Nottingham (174 miles round trip) on one occasion. The employee can claim relief for the entire distance traveled (174 miles).

Example 2:
An employee normally driving 40 miles to work takes a 100-mile round trip to a client’s premises, reimbursed by their employer. The employee can claim relief for the 100-mile trip.

2. Subsistence Payments

Subsistence includes costs for accommodation, food, and drink incurred while away from the permanent workplace. These costs are treated as part of business travel expenses and can be claimed for tax relief.

3. Anti-Avoidance Rules

Travel costs incurred between a temporary workplace and home may not qualify for tax relief if deemed “substantially similar” to the commute to the permanent workplace. HMRC interprets “substantially similar” as using the same route for most of the journey.

4. Temporary Postings

If an employee is assigned to a different workplace for a prolonged period, it can still be considered temporary if:

• The assignment is expected to last less than 24 months, or
• If it exceeds 24 months, the employee spends less than 40% of their working time at the new location.

Example 3:
Edward, working in New Brighton, is assigned to Wrexham for 1.5 days a week for 28 months. Edward qualifies for relief under these conditions.

5. Site-Based Employees

Employees who do not have a fixed workplace and work at various sites (e.g., construction workers, safety inspectors) can receive tax-free reimbursements for travel and subsistence, provided their time at any site is less than two years.

Anti-avoidance provisions ensure that the employment is genuinely site-based, preventing manipulation of the 24-month limit through repeated temporary assignments.

6. Employees Without a Permanent Workplace

• Travelling Appointments: Employees who travel as part of their role (e.g., salespeople without a fixed base) can claim travel and subsistence expenses.
• Home-Based Employees: Working from home occasionally or regularly doesn’t automatically classify home as a workplace. For home to be considered a workplace, there must be a clear need for the work to be conducted there.

If the home qualifies as a workplace, journeys between home and other workplaces can be claimed. However, trips between home and the employer’s office would be disallowed as commuting expenses unless the employee has no permanent workplace, in which case they may be treated as a site-based employee.