It’s one of the questions we’re often asked. When can employees claim expenses for travel to work? Also known as ordinary commuting. The answer can be complex and depends on several factors.
Claiming ordinary commuting travel expenses
For tax purposes, ordinary commuting is clearly defined. It’s your usual journey to your permanent place of work. Therefore, the cost comes out of the employee’s own money. Alternatively, the employer may fund this travel. Then, the payments are treated as taxable expenses. They are also subject to National Insurance.
Place of work
So, how do employees go about claiming ordinary commuting travel expenses? There are two key factors in play. The first is the place of work. Places of work are defined as permanent or temporary. Most employees work at one specific location. It’s their main place of work. Their permanent place of work. Therefore, employees bear the cost of ordinary commuting.
Temporary place of work
Yet, some employees regularly work from several locations. Or, like a travelling salesman, they don’t work from a particular site. So, when is a place of work classed as temporary? There are two conditions. Do employees attend the workplace only for a limited period? Or are they there for a temporary purpose? To perform a particular task, perhaps? The second consideration is the timeframe in which the work should be completed. Assess how long the employment lasts in a set period. Is it weekly, monthly or annually?
Expenses for travel to a temporary place of work
First, calculate whether an employee works at the additional workplace more than 40% of the time. And is it for longer than 24 months? If so, treat it as a temporary place of work. The employee can claim travel to work expenses. What if the work carried out at that site takes less than 40% of the employee’s working time? In this case, there is no period of time consideration. This applies whether employees work full time or part time. So, use the 24-month rule as your criteria. If the work lasts longer than 24 months, the employee can claim travel expenses.
That said, sometimes the 24-month rule does not apply. For instance, if it’s a fixed term appointment at the main place of work. Or, if the work is undertaken through a Personal Service Company. Also, where the workplace is a depot or base. In these circumstances, the employee cannot claim ordinary commuting expenses.
New temporary place of work?
What happens if a temporary place of work alters? It depends. Should the new place of work still be regarded as a temporary place of work? Does the 24-month rule start again? If so, consider the additional time and travel costs. To qualify, HM Revenue & Customs (HMRC) says any changes should have a substantial effect on your journey to work. That said, HMRC does not define ‘substantial’. Therefore, consider how the additional time and expense impacts on your circumstances.
Temporary purpose test
So, what constitutes a temporary purpose? Essentially, it’s when work is undertaken for a particular reason. It’s self-contained rather than the continuation of a particular task. For example, a branch manager attends a monthly meeting at head office to discuss performance. This satisfies the temporary purpose rule. However, a dentist working each week at two practices would fail the test. Satisfied the temporary purpose test? Then, the 24-month rule does not apply. Such journeys are ordinary commuting. Employees are not entitled to claim expenses.
Working from home
Due to the pandemic, more employees work at home most of the week. The key consideration is whether home working is voluntary. If so, even if the temporary purpose and duration of work tests are satisfied, journeys into the office are not treated as ordinary commuting. Employees can claim expenses.
Tax and NIC free
What if an employee must do their job at a temporary place of work? Here’s how the costs are treated. It can be the actual cost of mileage. Paid at HMRC’s official rates. Or the actual cost of travel by public transport or taxi. Either way, employers can pay it tax and NIC free. Alternatively, employees can claim it as tax relief.
Claiming ordinary commuting travel expenses can be a complex issue. If in doubt, seek advice. Call us on 01785 243276.