Travel, tax and “temporary” workplaces

Tax and travel

Before looking at the First-tier Tribunal’s (FTT’s) ruling let’s briefly run through the tax rules it concerns. The cost of business journeys is exempt if met by an employer for an employee or is tax deductible if the employee meets them from their own pocket. The exemption/deduction doesn’t apply for travel between an employee’s home and a place of work unless it’s a temporary workplace .

Temporary workplaces

A temporary workplace is one where staff carry out a task of “limited duration”, e.g. they visit the same place for a few months to work on a project, or they travel to it for a temporary purpose. But if the same journey goes on or is expected to go on for a continuous period of more than 24 months, the workplace counts as permanent and the exemption/deduction doesn’t apply.

Note.  Further rules restrict the exemption/deduction if they work on short-term contracts, or through an intermediary like a personal service company.

The FTT case

Mr Sambhi (S) worked for a construction company at sites around Birmingham. His job later required him to work at various sites in London. This arrangement lasted several years. S’s attendance at each London site lasted weeks or months. It was impractical for him to travel to the sites from his home in Birmingham each day, so he took temporary accommodation in London and travelled to the temporary workplaces from there. He returned to his home at weekends.

Tax rules? The FTT considered how the tax rules applied based on the business journeys starting from his home in Birmingham, via his London accommodation and on to the various London sites.

What did the FTT conclude?

The legislation says that a journey only counts as being made to a temporary workplace if there’s a “substantial effect on the employee’s journey, or expenses of travelling, to and from the place where they are performed” . The FTT decided substantial means “sizeable” in either time or cost and not whether the journeys were on the face of it “materially” different. The FTT looked at S’s average weekly travel costs and time for journeys to each site; they only varied by £14 weekly in costs, or 30 minutes’ difference in a one-way trip. It didn’t think the differences were “sizable”. Therefore, each site wasn’t a temporary workplace and the tax exemption/deduction didn’t apply.

Lessons

While the ruling isn’t binding it raises tricky issues. If the company is meeting the costs of an employee’s travel costs to various locations, it must treat them as taxable earnings unless the locations are temporary workplaces . That’s only the case if, compared with an employee’s normal commute, they are materially different, taking account of both cost and distance. Tip. The good news is this rule only applies if, like S who spent several years working in one area (London), the employee spends 40% or more of their working week at one site for a period of 24 months or more.