As a general rule, employees are denied a tax deduction for the cost of travel between home and work. Likewise, subject to a few limited exceptions, if the employer meets the cost of home to work travel the employee is taxed on it.
One of the main exceptions to this rule is where an employee attends a ‘temporary workplace’. This is a workplace the employee goes to in order to perform a task of limited duration or one he attends for a temporary purpose, even if it is on a regular basis.
Polly is based in the Milton Keynes office. She is seconded to the Bedford office for 12 months to cover maternity leave.
Polly is allowed a deduction for travel from her home to the Bedford office as this is a temporary workplace.
James is based in the Liverpool office. Each week he visits factories in Manchester and Bury to carry out safety checks. The factories are temporary workplaces as each visit is self-contained.
James is allowed a deduction for travel expenses incurred in visiting the factories, even if he travels there from home.
A workplace does not count as temporary if the employee attends a workplace in a period of continuous work which lasts, or is expected to last, more than 24 months. A ‘period of continuous work’ is one where the duties are performed at the location to a ‘significant extent’. HMRC consider this to be the case if an employee spends 40% or more of their working time there.
If the employee has spent, or is likely to spend, 40% of their working time at the location over a period of more than 24 months, that location will be a permanent location and consequently, home to work travel is ‘ordinary commuting’ which is not tax deductible.
Change of circumstances
Circumstances can and do change. If, at the outset, a posting is expected to last 24 months, the workplace will be treated as a temporary workplace. If later the posting is extended so that it will last more than 24 months, the workplace ceases to be a temporary workplace from the date that it becomes apparent the posting will exceed 24 months.
Fixed term appointments
An employee undertaking a fixed-term appointment is not entitled to relief for home to work travel (even one which lasts less than 24 months) if the employee attends the workplace for all, or almost all, of the period which they are likely to hold the appointment.
If the employer pays or reimburses travel expenses which would be deductible if met by the employee, the payment or reimbursement is exempt from tax.