Guidance

Safeguards against abuse of employee travel tax relief (490: Chapter 4)

How employers can protect themselves against employees abusing tax relief for their travel.

Safeguards against abuse

4.1

This chapter explains the safeguards written into the legislation to prevent tax relief being obtained in circumstances where it’s not properly due.

4.2

The safeguards have 3 aspects. They make sure that:

  • tax relief is available only where an employee has to attend at a workplace, in the performance of the duties of their employment, on a particular occasion - go to paragraphs 4.3 to 4.5
  • changing workplaces will not necessarily affect an employee’s entitlement to tax relief for travel - go to paragraphs 4.6 to 4.9
  • journeys which for practical purposes are ordinary commuting or private travel are treated as ordinary commuting or private travel - go to paragraphs 4.10 to 4.14

The ‘necessary’ attendance rule

4.3

Tax relief is available only where travel is in the actual performance of the employee’s duties or where it’s necessary – in a real sense – for the employee to attend the particular place on that occasion to perform the duties of their employment.

Usually the position will be straightforward and the requirements of the duties and the requirements of the employer will be identical. But it’s important to keep in mind that the strict test for tax relief is that the travel is dictated by the duties of the employment.

Tax relief is available only where travel or attendance is an objective requirement of those duties. The personal convenience of the employee cannot be the factor that determines tax relief.

Example

Philip is employed as the editor of his local paper. He normally works at the paper’s offices. However, to enable him to look after an aunt who is unwell, Philip’s employer tells him to work at his aunt’s home for a few weeks.

Philip is not entitled to tax relief for travel to or from his aunt’s home.

Although Philip carries out the duties of his employment there, his attendance is not an objective requirement of those duties.

4.4

It’s important to remember that tax relief is available only where an employee has to attend a temporary workplace on a particular occasion to carry out the duties of the employment.

Example

Rachel works for a firm of estate agents which has branches across the West Midlands. Rachel lives in Wolverhampton and works at the branch in Coventry. She has a number of business phone calls to make which can be made at any time during the day.

Rachel’s employer tells her to stop off at the Birmingham branch on the way to her permanent workplace in Coventry to make some of the phone calls. Rachel is not entitled to tax relief for the cost of her journey from Wolverhampton to Birmingham.

She and her employer cannot treat her ordinary commuting journey as a business journey by arranging the stop-off at the Birmingham branch. Her attendance at that branch is not an objective requirement of the duties of her employment.

For the same reasons Rachel is not entitled to tax relief for the cost of her journey from Birmingham to Coventry, again because that journey is not an objective requirement of the duties of her employment.

4.5

We recognise that there will be cases where the position is not clear cut. But we’ll look particularly closely at any case where an employer appears to send their employee to a temporary workplace just to get tax relief for travel expenses.

Where that has happened we’ll consider the scope of taking action against employers to recover PAYE or, if appropriate, recovering tax, interest and penalties from the employee.

Employers and employees should be aware that it’s a serious offence to make a false statement or claim to us.

Changes to a workplace

4.6

An employee’s workplace may change without significantly affecting their journey to work. Where an employee moves offices from Cardiff to Edinburgh there is clearly a change of workplace affecting the employee’s journey to work.

But the position is different if an employee moves to a new office in the next door building. In these circumstances there is no significant effect on the employee’s journey to work and under the tax rules there is no change of workplace.

This rule prevents employers from making small changes to the place where an employee works to take advantage of the temporary workplace rules. Where there is no significant change to an employee’s journey the rule operates to treat the 2 workplaces as being the same.

4.7

Sometimes it may be difficult to decide whether a change of workplace affects an employee’s entitlement to tax relief.

The basic principle is that a change in the location or boundaries of a workplace will give rise to a new workplace where the change has a significant effect on the:

  • journey an employee has to make to get to work
  • cost of that journey

Example

Catherine, a computer consultant, is the only employee of a company which she controls. She is a specialist in banking systems.

She spends 18 months working full-time at the headquarters of a merchant bank in Lombard Street in the City of London. She then moves next door to design a new computer system for a different bank where she expects to stay working full-time for 22 months.

After that assignment she moves to work at a bank close by on Cheapside for 17 months. Catherine is not entitled to tax relief for her travel from home to these workplaces, because the nature of her work is such that she expects to work continuously in the ‘Square Mile’ albeit on the premises of different banks.

So her travel from home to work will be broadly the same every day, year in year out (go to paragraph 4.6).

Example

Josh is employed on a construction site. His employer buys an adjacent plot to extend the site. Josh moves to work on the new plot but his journey to work (and in particular it’s cost) does not change significantly. That means there has been no change of workplace for tax purposes.

Example

Yinka works for an employer who has several offices close to each other in London. Her employer rotates staff around the offices every 18 months. Yinka works at one office and is then moved to another.

She travels to work using the London Underground and, although she now gets off a few stops further on, but within the same Travelcard zone, her journey is largely unaltered and the price of her ticket does not change.

Her workplace is not considered to have changed.

4.8

Where a change in location has a significant effect on the:

  • journey an employee has to make to get to work
  • cost of the journey to work

The new location is a new workplace even if it’s geographically close to the old workplace.

Example

Justin is employed on a major bridge construction project. To begin with he works on the north shore but he is then transferred to work on the south shore.

Crossing the river is inconvenient (which is why a new bridge is needed), and it takes Justin longer to travel to the south shore and costs much more than it did to travel to the north shore.

The north and south shores could be described as a single construction site and, as the crow flies, they’re not far apart.

However, Justin’s move from the north to the south shore has had a significant effect on his journey to work (and, in particular, the cost of that journey) so his workplace has changed for tax purposes.

4.9

Applying this rule may have the effect of denying tax relief for travel over longer distances in metropolitan areas than in rural areas. A change of location from Queensway to Bank could involve 8 stops on the Central line of the London Underground at no extra cost.

In these circumstances the modification rule comes into play. But 10 stops to the north on a train from Preston gets into Scotland, and 10 stops to the south could involve a journey beyond London, both at considerable extra cost.

There would be no question of applying the modification rule in these circumstances.

Example

Anna lives near Ludlow. Each day she used to drive 25 miles north to her workplace in Shrewsbury. Anna’s job is moved and each day she now drives 25 miles south to her new workplace in Hereford.

The mode of transport is the same, the time taken is the same, but the journey is in an entirely different direction. The fact that the costs of travelling to and from work do not change is a chance consequence of where she lives.

Had Anna lived elsewhere, the change in workplace would have had a significant effect on the cost of her commuting.

As such, the change in Anna’s journey would be regarded as a fundamental change to the place where her duties are carried out, rather than a modification. We regard the new location as a new and quite separate workplace.

Journeys treated as ordinary commuting or private travel

4.10

Sometimes an employee may travel to a temporary workplace without that journey being significantly different from their ordinary commuting journey.

The tax rules deny tax relief in circumstances where, for practical purposes, a journey is very similar to the employee’s ordinary commuting journey.

Example

Keith is a health and safety inspector who lives in Leicester. His office in Nottingham is 500 yards away from a processing plant which he visits on a quarterly basis to conduct health and safety reviews.

When he travels direct from home to the processing plant he is going to a temporary workplace but his journey is substantially the same as his ordinary commuting journey so he is not entitled to any tax relief.

Example

Lauren lives in Pudsey. She travels 5 miles to work in Leeds where she is a shop manager. One day she is asked to go to Ilkley to stand in for a colleague who is sick and so travels an extra 12 miles.

Her journey to Ilkley is clearly different from the journey she makes daily to Leeds so she is entitled to tax relief.

4.11

This is intended to be a common sense rule which applies where the journey to or from a temporary workplace is broadly the same journey as the employee’s ordinary commuting journey.

In particular, it will deny tax relief where employers or employees seek to turn an ordinary commuting journey into a business journey for the purposes of obtaining tax relief.

The application of this rule will depend on the particular circumstances of any case but we will not normally seek to argue that a journey to or from a temporary workplace is substantially ordinary commuting where the extra distance involved is 10 miles or more each way.

4.12

The same rule denies tax relief for journeys which are substantially private travel. This means journeys where the business purpose of a journey is merely incidental to some private purpose or the journey is made substantially for private purposes rather than for business purposes.

Example

Luke lives in Banbury and is employed as a systems analyst at an office in Aylesbury. Luke has a 3-week holiday in Italy. At the end of the holiday he flies back from Venice to Heathrow.

Instead of going home Luke drives direct from Heathrow to visit a client who needs to see him urgently in Warwick. The total cost of Luke’s journey from Venice to Warwick is £1,500.

Luke is not entitled to tax relief for the cost of this journey. While he had to visit the client the reason for the greatest part of his journey, and its cost, was private – his return from holiday. His journey was, therefore, substantially private travel.

Example

Paul is a manager of a bank in Swindon. One day he travels to Basingstoke to visit his elderly mother but while there calls in at the branch of the bank in Basingstoke to drop off some papers.

His purpose in going to Basingstoke was private so he is denied tax relief because his journey was substantially private travel.

Example

Andrea works for an accountancy firm in Northampton. Her employer sends her to the Coventry branch to attend a training event. Andrea’s sister lives in Coventry and while there she visits her sister.

She spends a lot longer visiting her sister than she does at the training event, however, she is entitled to tax relief for her travel from home to Coventry because her primary purpose in going there was business.

Meeting up with her sister was merely incidental to her business travel.

4.13

We will not use this rule to deny tax relief where comparatively small sums and short distances are involved.

Example

Mandy lives in Cannock and has a permanent workplace in West Bromwich. One weekend she goes to visit her grandmother in Lichfield. On Monday morning she drives directly from Lichfield to visit a client she has to see in Stafford.

Although the journey from Lichfield to Stafford is 6 miles longer than the journey would have been had she travelled from her home in Cannock to Stafford, it’s substantially for business purposes.

The journey is not therefore substantially private travel and Mandy is entitled to tax relief for her journey from Lichfield to Stafford.

4.14

The rule which denies tax relief for journeys that are substantially ordinary commuting is relatively easy to apply because there will generally be an ordinary commuting journey as a point of comparison.

That is not so for journeys where tax relief may not be available because a journey is substantially private travel.

Exceptionally, the application of the ‘substantially private travel’ rule may involve enquiries about the purpose of a journey.

We do not expect employers to make searching enquiries of their employees to determine whether tax relief is due. We will handle enquiries sensitively.

Published 28 March 2014