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Guide To Travelling Expenses

We hope our Guide to Travelling Expenses will assist you - click on a link to read more information on that subject:

1. Summary of the Rules for Employees relating to expenses generally
2. Travelling Expenses of Employees
3. Some examples for Employees of when relief might be obtained (and might not)
4. Some other points concerning travelling expenses
5. Overseas Travel
6. Persons from Abroad Coming to Work in the UK
7. Late Night Travel Home
8. Working Rule Agreements and Tax-Free Allowances
9. Disclaimer

1. Summary of the Rules for Employees relating to expenses generally

The basic rule enabling any expense to be deductible from employment income for tax purposes is that the expense must ‘be incurred wholly, necessarily and exclusively in the performance of the duties of the employment’. 

And in the words of one senior judge some years ago, taken together those three words ‘wholly, necessarily and exclusively’ amount to very nearly nothing at all. 

Almost any and every expense claim fails to pass one or other of the three tests and the Revenue have been successful in a long list of cases before the courts in ensuring that those words are interpreted very narrowly.

Furthermore there is another hurdle to surmount: the employment holder must be obliged to incur the expenditures. In plain language that means that each and every holder of that job would have to incur those same expenses and that they must be incurred as part of doing the job. 

The courts have the strictest interpretation of what being carried out in the performance of the duties is.  As a result claims often fail because while it may be necessary to incur expenditure, that expenditure may only be preparatory to carrying out the work or to enable the work to be done better, rather than being incurred in the performance of the duties of the employment.  There is a presumption in the law that the employer will provide all that is necessary for the employee to undertake his duties.

Nevertheless, certain claims are successful and each case should be considered on its merits. 

If you believe that you have grounds for a relief claim we shall be happy to review it and make the claim on your behalf where appropriate.

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2. Travelling Expenses of Employees

Travelling expenses are treated a little more leniently in that the ‘wholly and exclusively’ rule does not apply and the ‘in the performance of the duties’ test has been fractionally relaxed so as to permit ‘necessary attendance’ (in the performance of the duties).

The ‘obliged to’ and ‘necessarily’ tests remain, as does the ‘incurred in the performance of the duties’ test.  The former pretty well rules out any claim that merely arises by virtue of where an employee lives, since the law takes the view that where one lives is a matter of choice and therefore each and every holder of the employment would not be obliged to incur that expense. The latter confounds many claims on the basis that the travelling expenditures are incurred merely to place the employee in a position from which to carry out his duties. 

The recent relaxation in that rule however extends relief to qualifying travelling expenses, which are those that are attributable to the necessary attendance at any place in the performance of the duties of the employment.  The rule is intended to give relief to additional travelling expenses incurred for secondments to locations away from the main place of employment (thereby removing unnecessary impediments to the mobility of labour where it is required to carry out short-term tasks). But any expense of ordinary commuting is specifically excluded.

The Revenue have published a number of examples of where the relief may be claimed and where it may not be.  They do not cover all situations however and each should be judged on its merits. 

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3. Some examples for Employees of when relief might be obtained (and might not)

• If it is a condition of your employment that you provide a vehicle and you use that vehicle in performing the duties of your employment then relief should be obtainable.  That presumes of course that your employer does not fully reimburse you with the costs.
• If an employee has a permanent workplace and is despatched to visit suppliers or customers, or other workplaces, then relief may well be obtained.
• Those who have travelling appointments are usually entitled to relief.  Typically they will have no permanent workplace and visit the establishments of customers and suppliers and so forth at the direction of their employer. 
• On the other hand travelling between two separate employments will not qualify for a relief as it will be ordinary commuting.  And ordinary commuting does not become business travel merely by stopping off on a business errand on the way.
• Attendance at a temporary workplace for a limited duration commonly gives rise to problems, not least because of the impact of the 24-month rule which seeks to limit the term ‘temporary’.  Sadly, the relevant part of the act is particularly badly drafted with the result that uncertainty and argument can attend such claims.  It is commonly the case that temporary secondments are either for an uncertain period from the outset or are extended as a result of developments, time delays, project overruns and so on.  Relief may still be obtained despite the secondment lasting in excess of 24 months but it all depends upon the particular circumstances.
• Where the employment itself requires regular attendance at different locations then the employee will be judged to have more than one permanent workplace within the same employment and no relief will be due.  But again, whether the additional workplace(s) is or are additional permanent workplaces as against temporary workplaces (for which relief may be due) is always a question of fact to be determined by the particular circumstances of each case.
• The respective proportion of working time spent at another workplace can be relevant.  If more than 40% is spent at any workplace then the Revenue’s view is that it is a permanent workplace – if less a temporary workplace.   In such a situation the 24-month rule may not apply since it may never become a permanent workplace.   In which case the expenses of travelling may continue to be deductible.
• Where an individual holds two permanent workplaces in the same employment then the cost of travel from their home to each of those workplaces will not be deductible (ordinary commuting) but travel between those workplaces during the course of the day may well be.
• Attendance at depots and sites from which to begin work for the day will normally be ordinary commuting if that is the permanent workplace.  But only occasional attendance at an employer’s establishment, where the holder of the post has a travelling appointment for example, may well qualify for relief. 
• The employee’s home can be their permanent workplace, in which case they should be entitled to relief for travel to temporary workplaces where attendance is in the performance of the duties in the employment in the normal way.
• An employee may even regularly attend another workplace over a period of many years to perform duties and yet still obtain relief. 
• An employee’s permanent workplace may be a geographical area rather than a location with the result that travel within the area is simply ordinary commuting and no relief is due.
• While it may be thought that travel for emergency call-outs should have an entitlement to relief, the fact that it is an emergency is immaterial if the place to which the employee has been called out is his permanent workplace (although it is thought that relief might be obtained if it can be demonstrated that the employee is carrying out his duties during the course of travelling, say for example a doctor responding to a call and giving instructions over the telephone before beginning his journey.  By doing so he has undertaken responsibility for the task before setting out and therefore it is in the performance of the duties of the employment.)
• If an employee holds different positions within group companies then relief may be available for travel between the various workplaces for which the employments are held.

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4. Some other points concerning travelling expenses

Successful claims for relief for business travel are not reduced by the saving on ordinary commuting which would otherwise have been incurred.

The new(ish) rules have been particularly helpful for the travel expenses of directors of one-man service companies.

Whether a workplace has changed will always be a question of fact.  The Revenue’s view is that a change in location must have a significant effect on the journey and in particular the cost of the journey.  Hence a few extra stops on a tube line at no extra cost will be neither here nor there such that there is no change in the workplace i.e. it is treated as a modification to the workplace and is disregarded.  It may not be necessary to incur additional cost.  If the change would have had a significant effect on the cost of travel but for the mere chance that an employee’s home location nullifies any additional cost, nevertheless it will still qualify as a new workplace.

Ordinary commuting cannot be made into a business journey by simply attaching a convenience to it.  Thus despite that an employee may be instructed to stop off on route for an errand, or indeed to visit one of the employer’s office, nevertheless it will not make that ordinary commute into a business journey.

Where journeys to temporary workplaces in place of ordinary commuting are undertaken and no significant additional cost arises then no relief will be due.

Any journey which has a substantial private travel element may fail to qualify.

Travel costs have to be incurred. Any relief is given only to costs actually incurred.  That a cost might have been incurred had the employee not have been able to cadge a lift from a neighbour that was going that way is not sufficient.  There is no entitlement to relief for permission granted to an employee to incur up to a certain sum and indeed such an allowance may become taxable as salary in the hands of the employee.

Subsistence Expenses when incurred in connection with travelling will usually succeed or otherwise in accordance with the merits of the travel claim itself.  Excessive expenditure on food and drink and so on will be treated as entertaining and excluded.

Any reader who has braved this summary so far is to be congratulated on their perseverance.  They will also recognise that there is considerable scope for dispute with regard to the application of these rules.

We can assist you in the identification and most advantageous presentation of your claim.

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5. Overseas Travel

While the basic rules remain unchanged there are additional rules that can be helpful. 

An employee who is domiciled in the UK and working for a UK or Republic of Ireland employer, and who is resident and normally resident in the UK may be entitled to relief for the cost of travelling to begin a job and so on.  The rules are largely framed to ensure that employees are not taxed on the benefits of such travel when paid for by their employers. 

There will be only a few circumstances where an employee meets such costs out of their own pocket and thus for which a deduction may be claimable.  

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6. Persons from Abroad Coming to Work in the UK

An employee who is not domiciled in the UK can obtain relief for the cost of travel to and from the UK if they comply with certain strict conditions. 

They must not have been resident in the UK in either of the two tax years preceding the tax year in which they arrived or, alternatively, they were not in the UK for any reason at any time in the two years ending on the day of arrival.

But again, this is only a relief from the taxation of benefits-in-kind which would otherwise arise where the employer meets the costs.  There is not normally any relief for the travel costs to and from the UK where those costs are borne by the employee.

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7. Late Night Travel Home

Where the employer meets such costs then the employee may be entitled to relief from taxation on the benefit-in-kind, which would otherwise arise.

However, again, there is no relief normally for the cost of late night travel where it is borne by the employee.

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8. Working Rule Agreements and Tax-Free Allowances

There are a number of agreements between employers’ federations and trade unions that permit tax-free allowances to be paid.

Where an employee’s actual costs are in excess of the tax-free allowances paid then they may qualify for relief on the additional cost under the general rules.

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9. Disclaimer

While we hope the above has been found to be useful it is intended only as a general guide, may not reflect the very latest developments in tax law, and cannot be a substitute for professional advice. 

We cannot accept any responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this guide.

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