Kevin Read looks at the rules on travel to temporary workplaces by employees.
The tax rules (ITEPA 2003, s 338) deny a deduction from earnings for travel expenses incurred in ‘ordinary commuting’, which is travel between:
a) the employee’s home and a permanent workplace; or
b) a place that is not a workplace and a permanent workplace.
So, what is a ‘permanent workplace’? It is defined (in ITEPA 2003, s 339) as a place the employee regularly attends in the performance of the duties of the employment, and which is not a temporary workplace.
Temporary workplace
A ‘temporary workplace’ is a place the employee attends to perform a task of limited duration or for some other temporary purpose.
A workplace is not regarded as temporary if the employee’s attendance is during a period of continuous work of a significant extent (being at least 40% of working time) lasting:
- More than 24 months; or
- Comprising all, or almost all (i.e. at least 80%) of the period for which the employee is likely to hold the employment.
It becomes permanent at the time that it is reasonable to assume that one of the above is true. This could be at the start of the work, or during it (e.g. if an existing 18-month secondment is extended by another 12 months).
Example 1: Jack goes on secondment
Jack works for a firm of lawyers at its Winchester branch. He is sent to work full-time at the branch in Salisbury for 18 months, at the end of which he will return to the Winchester branch. Salisbury is approximately 25 miles west of Winchester.
Although Jack is spending all his time at the Salisbury branch, it will not be treated as his permanent workplace, as his period of attendance will not exceed 24 months. Therefore, Jack can claim a deduction for the costs of travel to and from his home to the Salisbury branch.
The allowable travel is from Jack’s home (or other starting point) to the temporary workplace, even if this is shorter than the journey to his permanent workplace, or he drives past his permanent workplace to get there. If his employer only reimburses the difference in mileage between the two journeys, the employee can claim a deduction for the balance.
Note that if Jack was recruited on an 18-month contract to work in the Salisbury office, this would be his permanent workplace (i.e. as he would be working there for all of his period of employment), and no travel costs would be deductible.
Subsistence costs
Where travel is deductible, any reasonable subsistence costs (e.g. hotels and evening meals) will also be deductible, although this is not likely to be relevant in Jack’s case, given the distances involved.
Employees working in an area
Travel expenses within an area are allowable if:
- the duties of employment are defined by reference to an area; and
- in performance of duties, the employee attends different places in the area; and
- none of the individual places is a permanent workplace.
Example 2: Carrie is a regional manager
Carrie is a supermarket regional manager, responsible for Cumbria. Her travel expenses for travelling within Cumbria are allowable.
However, if she chooses to live outside Cumbria (e.g. in Lockerbie), the expenses of travelling from her home to the area would not be allowable.
Planning tip
Contractual terms are very important in establishing whether somewhere is a permanent or temporary workplace. For example, if an employee is being taken on to carry out several short-term assignments at various sites, they will all be permanent workplaces if each location is dealt with under a separate contract.
This and other issues will be discussed further next month when I will discuss recent cases on temporary workplaces.
