Post pandemic, homeworking has become the norm, especially the increase in ‘hybrid’ working, i.e. spending part of the week at home and part in the office.
On the face of it, claims for tax relief on travel and subsistence costs for such employees should be straightforward, as in no claim, because if the employee were not working from home, they would bear the cost of ordinary commuting to the office or workplace.
However, that does not consider s337-339 Income Tax Earnings and Pensions Act 2003, which confirms that a deduction from earnings is allowed for travel and subsistence expenses where an employee is obliged to incur the cost should the workplace be temporary (i.e. not a ‘permanent workplace’). The question with homeworking is whether the home becomes the ‘permanent’ workplace and the office ‘temporary’.
Definition of ‘temporary workplace’
A ‘temporary’ workplace is somewhere where the employee attends to perform a task of limited duration or for a temporary purpose. Therefore, even if attendance is regular, the place may not be classified as a ‘permanent’ workplace. The next section of the s339 ITEPA 2003defines a ‘permanent’ workplace as being where an employee spends or is likely to spend more than 40% of their working time over more than 24 months. This rule is not just about the amount of time spent but also looks at the intention or expectation of the parties at the time the period was initially agreed and at any time subsequently.
Under this rule, travel from home to a place of work where the employee spends less than 40% of their time (e.g. two days out of five) should mean that the office is a ‘temporary’ workplace and therefore travel from home to the office (and any subsistence costs incurred) should be tax deductible.
HMRC appears to confirm this in their Employment Manual at EIM32065 where the text states that a temporary workplace is ‘somewhere the employee goes only to perform a task of limited duration or for a temporary purpose’. The text goes on at EIM 32150 to state that ‘where a visit is self-contained (that is, arranged for a particular reason rather than as part of a series of visits to the same workplace for the continuation of a particular task) it is likely to be for a temporary purpose’. The thought arises that should the attendance at the office be for a particular purpose (e.g. a sales meeting), then that may reinforce the point that the office is ‘temporary’ and that a claim may be possible.
HMRC’s stance
From the above it could be argued that a claim for travel from the home base to the office could be made. Pre pandemic, HMRC’s main investigations under this heading covered situations where employees had a workplace at home and employers met the cost of journeys between home and the office. Post pandemic, we can expect to see such situations being queried in the future, especially if the employer makes any reimbursement of costs incurred.
HMRC is aware of the increasing likelihood of claims (not least because many of HMRC’s employees still work at least some of their working time at home), so it has updated its guidance under EIM01471 headed ‘Employment income: employees who work at home: arrangement of guidance’ which confirms situations where tax relief may be claimed on expenses or benefits incurred whilst homeworking and provided by the employer. HMRC gives an example where a claim would be disallowed under EIM32174 ‘Travel expenses: travel for necessary attendance: employees who work at home: hybrid working example’. The example considers the scenario where a ‘flexible way of working is offered on a voluntary basis’ – this leads to the question as to whether the claim would be allowed should flexible working from home be compulsory.
Practical point
HMRC’s stance is that most employers provide all the facilities necessary for work to be carried out on business premises and therefore any employee working from home does so out of choice. Therefore, no tax relief for travel or subsistence costs whether paid personally or by the employer is available.
Partner note:
s337-339ITEPA2003
EIM01471
EIM32174
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