Travelling from home to an employee’s normal workplace does not qualify for tax relief. This is referred to as “ordinary commuting and, furthermore, if the costs of the journey are reimbursed by the employer, those costs are taxable. There are exceptions to this rule, in particular where the employer pays for the employee to travel home in a taxi safely late at night.
Travelling to a “temporary workplace” is a qualifying business journey and, where the costs are reimbursed by the employer, there is no taxable benefit. Note also that any associated subsistence costs such as overnight hotel accommodation costs are also a tax-free benefit. HMRC Booklet 490 provides detailed guidance on employee travel, together with comprehensive examples (this is an online document these days).
With more and more employees working from home these days, for at least one day a week, attention should be paid to the latest HMRC guidance on such arrangements.
Working from home
Whether or not an employee’s home is a workplace does not affect the availability of tax relief for travel expenses. Travel expenses from home to a permanent workplace will only qualify for tax relief if the journey qualifies as travel in the performance of the duties of the employment.
Even though it may have been accepted that the employee’s home is a workplace, it does not necessarily follow that they’ll be entitled to tax relief for the cost of travel between their home and a permanent workplace.
This is because the place where an employee lives will ordinarily be down to their personal choice. The expense of travelling from their home to any other place is a consequence of that personal choice; not an objective requirement of the job.
HMRC guidance states that where an employee performs substantive duties of their employment at home as an objective requirement of the job, they may accept their home as a workplace for the purposes of the ‘travelling in the performance of the duties’ rule. Where this is the case, the employee will be entitled to tax relief for the expenses of travelling from home to other workplaces, as their travel is in the performance of their duties.
HMRC will usually only accept that working at home is an objective requirement of the job if the employee needs certain facilities to perform those duties, and those facilities are only practically available to the employee at their home.
HMRC state that they will not accept that working at home is an objective requirement of the job if the employer provides appropriate facilities in another location that could be practically used by the employee, or the employee works from home as a matter of choice.
Even where the employee works at home as an objective requirement of the employment, tax relief for the cost of travel between their home and their permanent workplace will only be due for travel made on days where the employee’s home is a workplace.
Only on those days is the employee travelling between 2 workplaces. On other days the employee is travelling between their home and a permanent workplace, which is ordinary commuting.
Late night taxis paid by employers
Payments by the employer for taxis to take employees home late or at night are exempt from tax if:
- the failure of car sharing arrangements conditions are satisfied (see below); or
- all 4 late night working conditions are satisfied; and
- the number of such journeys for which a taxi has been provided for that employee in the tax year is no more than 60.
There are 4 late working conditions, all of which must be satisfied.
- The employee is required to work later than usual and until at least 9pm.
- This occurs irregularly.
- By the time the employee ceases work, either:
- public transport has ceased, or
- it would not be reasonable to expect the employee to use public transport.
- The transport is by taxi or similar road transport – this condition is not contentious and is not referred to again in this guidance.
The 60 journeys is a single limit that applies to late night journeys and failure of car sharing arrangements together. This means that journeys under both headings must be added together when working out whether or not the 60 journeys limit has been reached.
