In last December’s Tax Insider, we looked at travel and subsistence expenses for the self-employed, and this article completes the picture by dealing with the same topic where employees (including company directors) are concerned.
The rules are much more complicated than those for the self-employed, and in order to understand them we need to learn a new language:
– this means travelling to your “Permanent Workplace” whether from home or from anywhere else that is not connected with your job, and you cannot claim the cost as an expense.
– this is a place you attend “regularly” to work, and not a Temporary Workplace” you attend for a “temporary purpose”, or for a period of “limited duration”.
– means less than two years.
– means you do not spend 40% or more of your working time there – so if you are sent to work somewhere different for two days a week out of your five day week, then unless you are there for less than two years, that will become another “Permanent Workplace”
If you have to travel to a “temporary workplace”, you can claim the cost of the journey, whether you started from home, or from your “permanent workplace”, or indeed from anywhere else.
Confused? Shame on you – these are the “simple” and “fair” rules for whether travelling expenses are allowable as an expense of your work.
In any case, we haven’t even started on the complicated bits yet:
“Fixed Term Appointments”
If your job has a fixed term, or is expected to have a fixed term, then the place you work will be your “Permanent Workplace” even if the fixed term appointment is for less than two years.
“Substantially Ordinary Commuting”.
You cannot turn an “ordinary commuting” journey into travel to a “temporary workplace” just by finding a work related task to do on the way. For example, I live near Tavistock in Devon, and my “Permanent Workplace” is in Truro, 60 miles away in Cornwall. We have a number of clients who live near the road I use for the journey, but just because I call in to see one of them on my way to work or my way home doesn’t mean I can claim the cost of the journey. HMRC say they will normally accept that a 10 mile detour from the usual route (so 20 miles in total) means that this “substantial” rule will not apply to deny relief for the journey.
As a rule of thumb, if you are on a journey that qualifies as business travel (that is, it is not private travel or ordinary commuting), then the cost of subsistence (HMRC speak for meals, hotel bills, and so on) is also an allowable expense.
Some care is needed here – the expenses must be “necessary”, so while the cost of a hotel room and food and drink are allowed, unnecessary expenses such as a newspaper, or having your laundry done. There is a round sum allowance that an employer can pay tax free (at the generous rate of £5 per night) to cover these “incidental” overnight expenses.
There are two myths about subsistence, which even tax inspectors have been known to perpetuate:
it does not matter (from a tax point of view!) whether the drinks you have are alcoholic or non-alcoholic.
the test is whether the subsistence is allowable according to the rules above. If it is, then the fact that it is more expensive than it need be is irrelevant – so a first class ticket is allowable if a second class one would have been, and just because you choose the most expensive items on the menu does not mean the expense is not allowable.
Once, while working for one of the “Big Four” firms, I was on the road for several days doing numerous presentations to clients about the latest Budget. At the end of the last day I was in a hotel a long way from home and feeling sorry for myself, and it just so happened the hotel was having a “Gourmet Dinner Night”.
I joined in enthusiastically, and a week later got a phone call from the firm’s Expenses department, querying my claim for the hotel bill. I got on my high horse and started quoting them chapter and verse about an expense being allowable whether it was the cheapest option or not. It turned out that there had been a misunderstanding – the size of the bill for the Gourmet Dinner was such that they thought I must have had a guest (not allowable as an expense) at my table. Once I explained it was all my own work, there was no further problem!
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