When a business is paying the travel costs of a Director or an employee, the general rule is that they are exempt from any personal taxes while they are “wholly and exclusively” in the course of business. This can create a bit of a minefield especially where the travel is a mix of both business and personal, so in this blog post we take a look at the HMRC rules on business travel.

What isn’t allowed as business travel?

Sometimes it can be simpler to cover what is automatically not allowed to be reimbursed or incurred on behalf of an employee. These include:

Normal commute to a permanent or semi-permanent place of work (more on that below).
Parking fines and speeding tickets.
Travel costs not exclusively for work, for example topping up a travel card that is also used personally. However, if the employee can prove the costs incurred for business travel on that card, they can reclaim those.

For commuting costs, what classes as a permanent or semi-permanent place of work?

An employees’ costs incurred in commuting to work from home or any other place which is not a workplace, are personal travel costs and cannot be reimbursed by the business without it being a taxable benefit on the employee. This is true when commuting to a permanent or semi-permanent workplace, but commuting to a temporary workplace can be picked up by the employer so it is important to make the correct distinction.

HMRC state a place is a permanent or semi-permanent workplace if the “employee attends it regularly for the performance of the duties of the employment and it’s not a temporary workplace”. The term “regularly” is further defined as being if the attendance is:

Frequent
Follows a pattern
Is more all or most of the term of that employment

Frequency is subjective, so HMRC say that the more time that passes between visits, the more likely the workplace may be deemed temporary, but each circumstance should be considered on its own merits. It is perfectly possible for an employee to have 2 more permanent or semi-permanent workplaces, and the employee’s travel costs to those fall under commuting and therefore cannot be picked up by the business.

So when would HMRC deem a workplace to be a temporary workplace for business travel?

HMRC define a temporary workplace as one where “the employee goes there only to perform a task of limited duration or for a temporary purpose even where the employee attends it regularly”.

It’s important to stress the “or” and not “and” in the above statement. Let’s look at some HMRC examples:

Example 1
Fred is a safety officer at his employer’s Medway office. He visits the employer’s Derby factory every week to carry out a particular safety check. His responsibility for that factory has been a duty of his employment for a period already spanning 20 years, so it is not of limited duration. However, the tasks he performs on each visit are self-contained and the purpose of each visit, considered alone, is temporary. Fred is entitled to tax relief for the full cost of his travel to Derby.

Example 2
Peter lives in Kent and has a permanent workplace in Birmingham. He is a director of a company which has a number of regional offices. He has to attend a director’s meeting each Friday in Stafford. Although the directors’ meetings are regularly held in the same place, Stafford does not become a workplace for Peter because each visit is for a temporary purpose. So he is entitled to tax relief for the cost of his travel from his home in Kent to Stafford.

Where can’t be deemed a temporary workplace?

Even if workplace is temporary by virtue of the task being of limited duration or for some other temporary purpose, a workplace might still be deemed permanent. Such as:

Where the workplace is, or is intended to be, attended for continuous work which lasts or is likely to last 24 months or more. Continuous work is a period of work where their duties are performed to a significant extent at that place (40% or more of their working time).
The workplace is a depot or base from which they work, or where they are routinely allocated tasks. In these cases HMRC will not regard their attendance as being limited duration or for a temporary purpose, so it will be treated as a permanent place of work and travel is commuting which should be picked up by the employee. This can be particularly relevant for those employees mainly working from home.

Can an employee extend a business trip for a personal holiday?

As mentioned above, costs need to be “wholly and exclusively” incurred for the purposes of the business in order to be both a tax deductible expense for the business and to not be taxed on the employee. However, if an employee wished to seize an opportunity and extend a business trip for some personal travel – known as Bleisure – that doesn’t mean the whole trip has to be a personal expense. The costs relating to the business element of the trip can still be picked up by the employer and not be a taxable benefit for the employee.

For example, if an employee had to travel to New York for a business trip, but wished to extend the stay by 3 days so they could explore the city, they would have to pick up the following costs:

The hotel costs for those additional 3 days. They would also not be entitled to claim for any meal allowance for those 3 days.
Any additional costs incurred by the return flight being 3 days later than it otherwise would have been.

If the employee doesn’t reimburse for these and any other directly related costs, they will be taxable on the value.

At Veritons we keep in close contact with our clients to ensure they are both staying compliant with the tax legislation and being as efficient as possible by maximising what is available. We do all this under a fixed fee, so you can ensure you are operating as you should without fear of a bill following every question. If this sounds like what you are looking for in your accountant and tax advisor, hit the contact button below for your free, no obligation discovery meeting.