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HMRC internal manual

Employment Income Manual

Travel expenses: general: scale of expenditure: accommodation and subsistence: examples

Example 1

An employee of an Irish company is seconded to work in central London for 16 months. Her employer pays a round sum allowance of £560 per week to be used for accommodation and subsistence to the extent that she wishes. Although the allowance is intended for hotel accommodation she is permitted to rent a flat for a secondment of that duration. She rents a two bedroom flat in Tooting for £400 per week and spends the rest of her allowance on subsistence and travel between her flat and her workplace.

The amount spent on accommodation is reasonable and not excessive, see EIM31836. The employer pays a round sum allowance (see EIM05100) but can apply for the treatment set out on page 88 of booklet CWG2. If an Inspector accepts that the total amount paid does no more than cover the amount that a typical employee in this employee’s circumstances would spend on accommodation, travel and subsistence then the employer can be authorised to make the payment free of PAYE and Class 1 NICs. The payment must be included on the employee’s P11D and she will be allowed relief for the amount she actually spends.

Example 2

An employee of an Austrian company spends 18 months in the UK on secondment at a temporary workplace. Her employer rents for her a six bedroom house in Chelsea at a rent of £5,000 per week.

In some cases there may be a business need for accommodation on this scale, but it will have to be clearly established. Otherwise you should restrict relief to the cost of accommodation that could reasonably be regarded as attributable to the employee’s necessary attendance at the temporary workplace, see EIM31836.

Example 3

An employee of a German company is on secondment at a temporary workplace in the UK for 18 months. She is provided with a four bedroom house for herself, her husband and two children. A single employee in equivalent circumstances would only have been provided by her employer with a two bedroom flat.

On these facts part of what the employer provides is not a necessary expense attributable to the travel by the employee. Part of the accommodation is attributable to the accompanying family. Relief should be limited to the provision of a two bedroom flat, see EIM31836.

Example 4

A Swedish employee is seconded to a temporary workplace in Exeter for 15 months. He is a keen sailor and chooses to obtain accommodation in Salcombe, which is more expensive than Exeter.

On these facts the cost of accommodation in Salcombe is not attributable to the need for accommodation for the business trip. Relief should be limited to the cost of appropriate accommodation in Exeter and no relief can be permitted for the cost of travel between Salcombe and Exeter.

The key factor in this example is that the exercise of the employee’s choice about where to live while seconded to the temporary workplace gives rise to additional costs. These costs are not attributable to the business travel but to the employee’s private interests. However, such cases are likely to be rare. Many employees are permitted some discretion about where to live during a secondment. Provided that the exercise of that discretion does not result in significant extra costs you should not try to restrict relief. Example 5 illustrates the more common case in which relief can be permitted in full.

Example 5

An employee of a Belgian company is seconded to work at a temporary workplace in London for 18 months. The employer is prepared to pay rent of up to £800 per month to all of its employees on secondment in London. She is required to live within 1 hour commuting distance of the office but is otherwise given a free choice about where to live. She wants to live near her sister who lives in Ladbroke Grove and she is able to find a one bedroom flat in a suitable location at £750 per month, a cost the employer meets.

On these facts the full cost of the accommodation is attributable to the business travel. No attempt should be made to restrict relief on the basis that it might have been possible to find cheaper accommodation elsewhere within the 1 hour commuting limit. Relief should also be permitted for the cost of commuting between the flat and her temporary workplace.