Business travel

Conditions

1. GOV.UK's self-employed expenses guidance lists train, bus, tram, air and taxi fares among the car, van and travel costs a sole trader or individual in a business partnership can claim as allowable business expenses, and lists travel between home and work among the costs you cannot claim.
2. The statutory test for a sole trader is section 34 ITTOIA 2005: in calculating the profits of a trade, no deduction is allowed for expenses not incurred wholly and exclusively for the purposes of the trade. HMRC's guidance is that the cost of travelling from home to place of work is generally disallowed, because the journey is, at least in part, occasioned by the private choice of where to live, and that it does not matter that you may at times work at home or keep your business records, materials or tools there (BIM37605).
3. HMRC's guidance is also that the costs of travel to and from home and a place of work are not allowable where one of the purposes of the travel is to allow the trader to live away from their place of work, and that it does not matter that there may also be a business reason for the journey: duality of purpose is fatal to deduction (BIM37635).
4. There is an exception for an itinerant trade. Where an itinerant trader's base of operations is at their residence, HMRC says to allow the costs of travelling between the residence and the sites at which the trader works, an itinerant trader being one who travels from home to a number of different locations for the purely temporary purpose, at each, of completing a job of work (BIM37620). That does not reach travel from a home outside the trader's 'territory' (BIM37635).
5. Calling in on a supplier on the way does not change a journey between home and your place of work: HMRC states that visiting a supplier on a 'home to office' journey does not convert an otherwise non-allowable expense into an allowable deduction (BIM37630).
6. For a sole trader or company, HMRC's guidance on a mixed holiday and business trip is that where duality of purpose in travel is established, the costs are disallowable, because no part of the expenditure is referable wholly and exclusively to the trade (BIM37610). Its example is a solicitor who travelled to conferences abroad intending also to have a holiday with his wife, where the whole of the expenditure was disallowed. Where the sole purpose of the travel is the trade, the cost is allowable notwithstanding some incidental private benefit (BIM37615).
7. For a limited company the test is section 54(1)(a) CTA 2009: to qualify for a deduction, the trade purpose of the expense must be the sole purpose (BIM37600). Where a company incurs an expense that is linked to the personal interests of a director, HMRC says first to consider whether the expenditure gives rise to benefits taxable on the director as part of their remuneration package, and if it is taxable on the director as part of that package, to allow the company the deduction as part of the costs of employing the director (BIM47107).
8. For an employee or director there are two routes to relief. Section 337 ITEPA 2003 allows a deduction for travel expenses the employee is obliged to incur and pay as holder of the employment that are necessarily incurred on travelling in the performance of the duties. Section 338 allows a deduction for travel expenses the employee is obliged to incur and pay as holder of the employment that are attributable to the employee's necessary attendance at any place in the performance of the duties, but not for the expenses of ordinary commuting or private travel, or of travel between any two places that is for practical purposes substantially either of them (EIM31815). Private travel is travel between home and a place that is not a workplace, or between two places neither of which is a workplace (section 338(5)). HMRC's guidance is that it should not argue that a journey to or from a temporary workplace is substantially ordinary commuting where the extra distance involved is 10 miles or more each way, and that a journey to a temporary workplace in a completely different direction from the ordinary commuting journey is not substantially ordinary commuting even if the distance is the same (EIM32300).
9. Ordinary commuting is defined by the places travelled between: section 338(3) ITEPA 2003 defines it as travel between the employee's home and a permanent workplace, or between a place that is not a workplace and a permanent workplace. A permanent workplace is a place the employee regularly attends in the performance of the duties that is not a temporary workplace (section 339(2) ITEPA 2003), and travel to a temporary workplace is not ordinary commuting (EIM32055).
10. Start with section 339(3) ITEPA 2003, because everything else depends on it. A temporary workplace is a place the employee attends in the performance of the duties for the purpose of performing a task of limited duration, or for some other temporary purpose. HMRC's guidance is that the further rules below can only apply if the workplace is capable of being a temporary workplace by reference to section 339(3) ITEPA 2003 (EIM32075), and that the 24-month rule does not apply to a workplace that is not a temporary workplace under that definition. HMRC's example is an employee who works in Dolgellau for only 20% of their time: it is still not a temporary workplace, because they do not work there for a limited duration or for a temporary purpose (EIM32080, EIM32087).
11. If a place is capable of being a temporary workplace, section 339(5) ITEPA 2003 can still stop it being one. Under the 24-month rule it is not a temporary workplace if the employee's attendance is in the course of a period of continuous work there lasting more than 24 months, or at a time when it is reasonable to assume that it will be. A period of continuous work is one over which the duties are performed to a significant extent at the place (section 339(6) ITEPA 2003), and HMRC treats duties as performed to a significant extent at a workplace if the employee spends 40% or more of their working time there (EIM32080). Because the rule runs on what it is reasonable to assume, its effect is not altered where the expectation does not match the outcome, but it can be altered when there is a change of expectation (EIM32080).
12. Under the same subsection, a place is not a temporary workplace if the period of continuous work there comprises all or almost all of the period for which the employee is likely to hold the employment (section 339(5) ITEPA 2003). HMRC says it should not normally challenge relief where the likely duration of work at a workplace is less than 80% of the likely duration of the employment (EIM32125).
13. Section 339(4) ITEPA 2003 treats a place the employee regularly attends as a permanent workplace, and not a temporary one, if it forms the base from which the duties are performed, or if the tasks to be carried out in the performance of the duties are allocated there. HMRC's guidance is that this does not mean every place from which an employee works or at which they are allocated tasks must be a permanent workplace: a depot or similar workplace will be a permanent workplace only if the employee attends it regularly and the main reason they go there is because it is the place from which they work or at which they are routinely allocated tasks (EIM32160).
14. Section 339(8) ITEPA 2003 treats an employee as having a permanent workplace consisting of an area where the duties are defined by reference to an area (whether or not they also require attendance at places outside it), the employee attends different places within it, none of those places is a permanent workplace, and the area would be a permanent workplace if the rules referred to the area rather than to a place. HMRC states the conditions as: the employee has no single place that is his or her permanent workplace, the employee attends the area regularly, the duties of the employment are defined by reference to that area, and if the area was to be treated as a workplace it would be a permanent workplace (EIM32190).
15. A change of workplace that does not have any substantial effect on the employee's journey, or expenses of travelling, is disregarded for the 24-month and fixed-term rules (section 339(7) ITEPA 2003), so that the two workplaces are treated as a single workplace (EIM32280).
16. Separate rules apply if you provide your services personally to a client through an employment intermediary, meaning a person, other than you or the client, who carries on a business of supplying labour, and not under a contract directly with the client or a person connected with it. In that case section 339A ITEPA 2003 treats each engagement as a separate employment for the purposes of sections 338 and 339. It does not reach excluded services, meaning services provided wholly in the client's home (section 339A(1)(a), (11)): HMRC's example is a gardener working through his own company in a client's own home, who isn't covered (ESM5540). HMRC lists an agency, a recruitment or employment business, an umbrella company, a managed service company and a personal service company as intermediaries this can involve, and says it will mean that generally no relief will be given for home-to-work travel costs and associated subsistence (EIM32135).
17. Section 339A does not apply if it is shown that the manner in which you provide the services is not subject to (or to the right of) supervision, direction or control by any person (section 339A(3)). HMRC's basic assumption is that, unless it is shown otherwise, all workers are under supervision, direction or control, and that it does not have to be actually exercised in practice: the right to it is enough (ESM5560). This is a test of how you work, not of your status under the off-payroll working rules (IR35): those rules come into it only where the intermediary meets the conditions in the next paragraph, and never where it is a managed service company.
18. Where the intermediary does meet those conditions, the supervision test gives way to the off-payroll working rules in Chapter 8 or Chapter 10 of Part 2 ITEPA 2003, and which Chapter applies depends on the client. Chapter 8 covers services provided to a client that is not a public authority and that either qualifies as small for a tax year or does not have a UK connection for a tax year (section 48(1)). Chapter 10 covers a client that is a public authority, or that qualifies as medium or large and has a UK connection (section 61M(1)). For Chapter 8 the conditions are those in sections 51 to 53, read as section 339A(6) directs, so a company meets them only where it is not an associated company of the client by reason of the intermediary and the client being under your control (alone or with others), and you have a material interest in it (section 51(1), (2); ESM5580), which section 51(4) defines as more than 5% of its ordinary share capital, of any distributions or, for a close company, of its assets on a winding up. Chapter 10's conditions are Conditions A to C in section 61N, and they are not the same. For a company, Condition A is met where the company is not an associated company of the client by reason of the intermediary and the client being under your control (alone or with others) (section 61O(1)(a), (2)), and either you have a material interest in it, on the same more-than-5% definitions (section 61O(1A), (4)), or you have a non-material interest of 5% or less and you have received, are entitled to receive or expect to receive a payment or other benefit from it for your services to the client that is not wholly your employment income apart from Chapter 10 (section 61O(1B), (4B); section 61N(2)). So a company in which you hold 5% or less can meet Chapter 10's conditions, where for Chapter 8 it cannot. In both Chapters an interest held by an associate of yours, alone or with you, counts as yours (section 51(3); section 61O(3), (4A)). Condition C is met simply where the intermediary is an individual. If those rules apply to the engagement, section 339A applies without the supervision exception (section 339A(4), (6A)); if they do not apply only because, engaged directly, you would not be regarded as an employee or office-holder of the client (section 49(1)(c), section 61M(1)(d)), section 339A does not apply at all (section 339A(5), (6B)). Neither applies where the intermediary is a managed service company (ESM5530).
19. Agency workers can also be caught by section 44 ITEPA 2003, which treats a worker supplied through an agency as holding an employment with the agency unless it is shown that the manner in which they provide the services is not subject to (or to the right of) supervision, direction or control by any person (section 44(2)(a)), or the remuneration the worker receives for the services is employment income apart from those rules (section 44(2)(b)). HMRC's guidance is that where it applies, each agency contract is treated as a separate employment, so where there is only one workplace for an agency contract, that workplace will be a permanent workplace for that employment; where an agency worker does several jobs on the same day, travel between the jobs can be deducted, but not travel from home to the earliest job of the day or home from the latest (EIM32130).
20. Which of these routes you are on turns on your contract, your client and how you actually work, and on supervision, direction or control HMRC will consider the arrangements overall, including the terms of the engagement and the way the work is actually done in practice (ESM5560). If you work through an agency, an umbrella company or your own company, have an accountant check your position before claiming.
21. GOV.UK's guidance for employees says you cannot claim for travelling to and from work, unless you're travelling to a temporary place of work, and lists public transport costs among the costs you can claim. If your employer has paid some of your expenses, you can only claim tax relief on the amount they have not paid, and if you complete a Self Assessment tax return, you must claim through your tax return instead.
22. Where an employer pays or reimburses travel costs, section 289A ITEPA 2003 means no income tax charge arises on the amount under Chapter 3 of Part 3 (taxable benefits: expenses payments) where an equal or greater amount would be allowed as a deduction from the employee's earnings under Chapter 2 or 5 of Part 5 (Chapter 2 being where the travel rules in sections 337, 338, 339 and 339A sit), and the payment or reimbursement is not provided pursuant to relevant salary sacrifice arrangements. GOV.UK's guidance for employers counts all non-business travel as private, including the journey between an employee's home and permanent workplace, and says that if an employer reimburses more than the necessary costs of business travel, the extra amount counts as earnings, with PAYE tax and Class 1 National Insurance deducted and paid through payroll.
23. For an employee or director, HMRC's rule is that a single expense can be apportioned if a definite part or proportion of it can properly be attributed wholly and exclusively to the performance of the duties, and that part can be deducted while the rest cannot; but expenditure cannot be apportioned where it serves two or more purposes concurrently and one of them is not to do with the performance of the duties, unless the non-business purpose is merely incidental to the business purpose (EIM31661).

Common mistakes

• Claiming a commute as business travel.
• Treating a trip planned as both business and holiday as if the business part could simply be claimed. For a sole trader or company, where travel has a dual purpose HMRC treats the travel costs as disallowable (BIM37610); it is where the sole purpose of the travel is the trade that the cost is allowable notwithstanding some incidental private benefit (BIM37615).
• Starting with the 24-month rule. For an employee it only comes into play if the workplace is capable of being a temporary workplace under section 339(3) ITEPA 2003 (EIM32075).
• Assuming a contractor's travel turns on IR35 status. Under section 339A ITEPA 2003 the starting test is supervision, direction or control (ESM5560); the off-payroll rules come into it only where the intermediary meets the conditions in sections 51 to 53 or section 61N, and never through a managed service company.

What to keep

• Tickets, booking confirmations and accommodation invoices.
• A note of the business purpose of each journey.

Real-world example

An employee whose permanent workplace is her employer's Bristol office is sent to a client's London office three days a week for a project expected to last 18 months. Her attendance there is for a task of limited duration, so London is capable of being a temporary workplace (EIM32075). She spends 40% or more of her working time there, but the period is not expected to last more than 24 months, so the 24-month rule does not stop it being temporary, and her fares between home and London are not ordinary commuting. A year in, the project is extended and it becomes reasonable to assume her work there will run for more than 24 months in all. From the point the expectation changed, London is no longer a temporary workplace (section 339(5) ITEPA 2003, EIM32080), and her fares between home and London are ordinary commuting.

Frequently asked