This guide outlines the UK tax rules for deducting or reimbursing employee travel and subsistence expenses, based on legislation and HMRC guidance. These rules apply to employees and directors.
Qualifying for Tax Relief on Travel Expenses
For an employee to claim a deduction for travel expenses, the costs must meet specific statutory conditions. The two main rules for travel expenses are:
- Travel in the Performance of Duties: A deduction is allowed if the employee is required to incur and pay travel expenses while actually performing their job duties. The key condition is that the expenses must be “necessarily incurred”. This covers employees with “travelling appointments” whose work inherently involves travel (e.g., a service engineer who travels from one client site to another).
- Travel for Necessary Attendance: A deduction is allowed for expenses attributable to an employee’s “necessary attendance” at any place to perform their duties. However, this rule explicitly excludes the costs of “ordinary commuting” or “private travel”.
Permanent vs. Temporary Workplaces
The ability to claim for travel to a workplace depends heavily on whether it is a “permanent” or “temporary” workplace.
- Workplace: A place where the employee’s attendance is necessary to perform their duties.
- Ordinary Commuting: Travel between an employee’s home and a permanent workplace is considered ordinary commuting, and the costs are not deductible.
- Permanent Workplace: A place the employee attends regularly for their job, which is not a temporary workplace. A location can also be deemed a permanent workplace if it is the base from which duties are performed or where tasks are allocated.
- Temporary Workplace: A place an employee attends to perform a task of limited duration or for another temporary purpose. Travel from home to a temporary workplace is generally allowable.
Key Limitations for Temporary Workplaces:
- The 24-Month Rule: A workplace is not considered temporary if the employee attends it for a continuous period of work lasting more than 24 months, or if it is expected to last that long. In such cases, it becomes a permanent workplace, and travel to it is treated as ordinary commuting.
- Fixed-Term Appointments: If an employee attends a workplace for a period that is expected to comprise all or almost all of their employment period, that workplace is considered permanent, regardless of its duration.
Accommodation and Subsistence Costs
The term “travel expenses” includes more than just the cost of a ticket. It can cover:
- The actual cost of travel (e.g., train fares, flights).
- Necessary subsistence costs incurred during the journey, such as meals.
- The cost of accommodation and necessary meals where an overnight stay is required for business.
- Other associated costs, such as utility bills for temporary accommodation.
A deduction is only allowed for subsistence costs that are additional to what the employee would normally incur if not on a business trip. For example, the cost of a sandwich bought at a train station during a business journey is allowable, but a sandwich made at home and eaten on the journey is not, as the cost was not incurred during the travel.
Regarding set rates for meals, HMRC guidance notes that there are no generally applicable authorized subsistence rates. Employers may agree on bespoke scale rates with HMRC for their employees.
For overnight stays, employers can also make tax-free payments for incidental expenses (e.g., laundry, phone calls home) up to statutory limits.
Specific Travel Scenarios
The legislation provides for several other specific situations:
- Travel Between Group Employments: A deduction is allowed for travel between workplaces of two different companies within the same group (a company and its 51% subsidiaries).
- Travel for Overseas Employment: UK resident employees whose duties are performed wholly outside the UK can receive a deduction for the costs of travelling from the UK to take up the job and for returning to the UK when it ends.
- Workers Provided via Intermediaries: Special rules apply to workers who provide their services to a client through an intermediary, such as a personal service company. If the worker is subject to (or the right of) supervision, direction, or control, each engagement with a client is treated as a separate employment. This generally prevents the worker from claiming relief for home-to-work travel and subsistence costs, as the client’s site is treated as a permanent workplace for that engagement.
Compliance and Record-Keeping
To claim a deduction or receive tax-free reimbursement, it is essential to prove that the expenses were incurred and meet the relevant conditions. While the sources do not specify a retention period, keeping detailed records, including journey logs and receipts, is crucial to substantiate any claim. If an employer reimburses an employee for more than the amount allowable for tax purposes, the excess may be treated as taxable earnings.