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HMRC internal manual

Employment Income Manual

Tax treatment of working rule agreements: daily travel allowances

In respect of journeys to and from sites, working rule agreements commonly provide for:

  • payments in respect of travelling time, which are fully taxable in all circumstances, and
  • payments towards the cost of travel, variously described as travelling allowances, fares allowances or radius allowances. The rules and rates of payment vary from one agreement to another, as does the taxation treatment. Commonly, though, the arrangements are that any allowances paid for an initial threshold distance are taxable, whilst amounts paid in respect of distances in excess of this threshold are tax-free. This threshold distance is usually set at the first 6.4 kilometres (4 miles) (that is 12.8 kilometres, or 8 miles, round trip) of each daily journey.

Although travel will commonly be direct from home to site and return without visiting the employer’s base or depot, nevertheless under many working rule agreements, the amount of the travel allowances payable will be determined by the distance from depot to site. Workers using their own vehicles, as opposed to public transport, are entitled only to the allowances specified under the working rule agreement.

For payments made to holders of provided cars see EIM25500.