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HMRC internal manual

Employment Status Manual

Employment intermediaries travel expense provisions: introduction

Income Tax (Earnings and Pensions) Act 2003 (ITEPA), Part 5, Chapter 2, sections 337 to 342

Social Security (Contributions) Regulations 2001,  Schedule 3, Part 8, paragraphs 3, 3ZA & 3ZB


Sections 337 to 342 of Income Tax (Earnings and Pension) Act 2003 (ITEPA) prescribe when employees can obtain tax relief for travel expenses. For this purpose, ‘travel expenses’ include the actual costs of travel together with any subsistence expenditure and other associated costs that are incurred in making the journey [EIM31815]. When these expenses are reimbursed, there is a corresponding National Insurance contributions (NICs) disregard.

From 6 April 2016, new provisions changed the treatment of travel and subsistence expenses for workers providing their personal services to clients through employment intermediaries. When these new provisions apply, each engagement the worker undertakes is regarded as a separate employment for the purposes of travel and subsistence and the worker’s travel and subsistence expenses are treated as if the worker was directly employed by the engager. This will mean that generally no relief will be given for home-to-work travel costs and associated subsistence. However, in certain circumstances, the new provisions are modified or disapplied.

In this section of the Employment Status manual, these new provisions will be referred to as the employment intermediaries travel expense provisions. The tax provisions are subject to Parliamentary approval.  Further changes for the NICs provisions came into force on 6 July 2016.

Ordinary commuting and permanent workplaces

The travel expense rules in sections 337 to 342 of ITEPA (including the definitions of ‘ordinary commuting’ and ‘permanent workplace’) set out where tax relief can be applied. In general, tax relief is available for travel and subsistence expenses which workers are obliged to incur and pay for including:

  • travel in the performance of their duties, or
  • travel to or from a place they necessarily attend in the performance of their duties (excluding ordinary commuting), or
  • travel between a worker’s home and a ‘temporary’ workplace


Where a worker’s expenses are reimbursed, there’s a corresponding disregard for NICs purposes.

This relief is available provided the journey isn’t ordinary commuting or private travel. No relief is available for ordinary commuting, which is travel between home (or a place that is not a workplace) and a ‘permanent workplace’.

There are a number of criteria for determining if a workplace is temporary or permanent, but in general a workplace will always be a permanent workplace if the worker:

  • regularly goes to the same workplace in the course of a period of continuous work which lasts or is likely to last more than 24 months, or
  • regularly goes to the same workplace for all or almost all of the time for which the worker is likely to hold (or continues to hold) the same employment [EIM32125].


Who the changes affect

The changes affect workers personally providing services to clients through an ‘employment intermediary’ [ESM5550], which could be:

  • an agency
  • a recruitment or employment business
  • an umbrella company
  • a managed service company (MSC)
  • a personal service company (PSC)


When the employment intermediaries travel expense provisions apply, workers engaged through an ‘employment intermediary’ cannot claim tax relief or a disregard for NICs on the travel and subsistence expenses, such as the cost of lunch or dinner or overnight accommodation, they incur on an ordinary commute from home to work. The employment intermediaries travel expense provisions apply regardless of how workers are remunerated.

The changes

From 6 April 2016, section 339A has been introduced into ITEPA. This sets out the new tax provisions for the treatment of travel and subsistence expenses for workers who personally provide services through ‘employment intermediaries’.   The new tax provisions will not apply if it is shown that the manner in which the worker provides the services is not subject to (or to the right of) the supervision, direction or control (SDC) of any person (ESM5560).

There is a modification [ESM5580] for workers engaged via intermediaries within the scope of the intermediaries legislation, (ITEPA, Part 2, Chapter 8 and the Social Security Contributions (Intermediaries) Regulations 2000) and where certain conditions contained in section 339A ITEPA are met. When the conditions are met so that the modification applies, the intermediary is not required to consider the supervision, direction or control test (ESM5560). However, this modification doesn’t apply in any circumstances to companies which are MSCs, or would be MSCs but for the fact that the worker takes all their income as employment income.

Similar changes have been made to the NICs disregard.  However, for NICs purposes the legislation applies in a different way depending on the period under consideration. For expenses paid prior to 6 July 2016, the modification applies in the majority of cases and intermediaries (which are not MSCs) need to consider what the worker’s employment status would be if they were contracted directly by the engager.  Where the worker was an office-holder of the client or would properly be considered an employee or office-holder if engaged directly by the client, then each engagement is regarded as a separate employment for the purposes of obtaining relief for travel and subsistence expenses.

However, from 6 July 2016, where payments of, or contributions towards, such expenses are made, the intermediary will usually need to consider whether the worker is subject to (or to the right of) the supervision, direction or control (ESM5560) of any party. The modification will only apply in more limited circumstances and in line with the tax position (ESM5580). In particular, from 6 July 2016, when considering the conditions set out in modified section 51 of ITEPA in sub-paragraphs (4)(b) or (5)(b) of paragraph 3ZB of Schedule 3 to the Contributions Regulations, a company will only meet these conditions where they are not an associated company of the client and the worker has a material interest in the employment intermediary.

Where a worker’s circumstances are such that they would be properly considered as self-employed if engaged directly, the employment intermediaries travel provisions do not apply.

Further information

The effect of the employment intermediaries travel expense provisions - [ESM5520].

The application of the employment intermediaries travel expense rules, including exceptions and modification - [ESM5530] onwards.

The position for workers engaged through employment intermediaries before 6 April 2016 - [ESM5680].

 Further information on the treatment of travel and subsistence expenses:

  • tax - Employment Income manual [EIM31800]
  • National Insurance contributions - National Insurance manual [NIM06250]