Tax Rules on Travel Expenses

The rules surrounding tax relief on travel and incidental costs are quite specific for journeying between various work-related locations.

Tax Rules Travel Expenses

(Read Time: Approx. 3 minutes)

Topics Discussed:

  • Eligibility criteria for travel tax relief.
  • Exclusions pertaining to home-to-work travel, and the impact of temporary workplaces on travel expense claims.

Eligibility for Tax Relief

Owners and managers are often required to travel extensively for work, whether it’s between different workplaces, appointments, or other business activities.

Fortunately, these travel costs, along with incidental expenses, qualify for National Insurance Contributions (NICs) relief.

It’s important to note that the daily commute from home to a permanent workplace does not qualify for such relief, with specific exceptions.

Understanding the Exceptions

The general rule for tax relief for home-to-work travel holds two notable exceptions.

Firstly, if ‘work’ involves traveling to a temporary workplace, the costs incurred are allowable.

Secondly, if an individual’s home qualifies as a workplace based on their unique circumstances, then travel expenses may also qualify for tax relief.

This determination hinges on the specific duties and operational necessities of the owner or manager.

Incidental Costs of Travel

When travel qualifies for tax relief, so do the incidental costs associated with it.

These include subsistence, accommodation, and incidental overnight expenses.

It’s essential to keep accurate records of these expenses to substantiate claims for tax relief.

Special Considerations

Remember that owners or managers are taxed as “employees”.

This classification has significant implications for how travel expenses are treated for tax purposes.

For those who are self-employed, different rules apply. This includes the aforementioned rule on someone’s house being counted as a workplace.

This highlights the importance of understanding one’s employment status and its tax ramifications.

Temporary Workplaces

A specific regulation, Section 339A of the ITEPA 2003, addresses workers employed through employment intermediaries.

This rule effectively changes the classification of what constitutes a temporary versus a permanent workplace, with implications for tax relief eligibility on travel expenses.

Under this rule, engagements considered separate employments could transform a temporary workplace into a permanent one, thus disqualifying travel expenses from tax relief.

This particularly affects Personal Service Companies (PSCs) within IR35 and Managed Service Companies (MSCs).

To Summarise

The rules surrounding travel expenses for owner-managers are layered with complexity.

From distinguishing between temporary and permanent workplaces to navigating the intricacies of IR35, understanding these regulations is pivotal.

For owners or managers seeking to optimise their tax positions, staying informed and seeking professional advice is key.

At Tax Expert, we’re here to guide you through the maze of tax relief opportunities, ensuring your business stays compliant while maximizing its financial health.

Contact us today at 01772 788200 to find out more about how we can help, or WhatsApp us out-of-hours at 07787 010190.

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Kind regards,

Ilyas Patel