Taxis & ride-hailing

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. 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).
4. Where one fare covers both business and private travel, such as a taxi from a client meeting on to a personal appointment, HMRC's guidance on the statutory test for a sole trader or company distinguishes a definite part or proportion of an expense that is wholly and exclusively for the trade, which is not disallowed because the expense as a whole is not, from an expense incurred for a dual purpose, which is not allowable (BIM37600). The statute itself states the part-deduction rule: if an expense is incurred for more than one purpose, the wholly-and-exclusively rule does not prohibit a deduction for any identifiable part or identifiable proportion of it incurred wholly and exclusively for the trade (section 34(2) ITTOIA 2005, section 54(2) CTA 2009).
5. 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).
6. 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).
7. 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. Whether a place is a permanent or a temporary workplace, and so whether a journey to it is ordinary commuting, is a statutory test with several parts, and there are separate rules where you provide your services through an employment intermediary such as an agency, an umbrella company or your own company (section 339A ITEPA 2003, EIM32135). The Business travel page sets that test out. How it applies turns on your own working pattern and contract, so it is worth having an accountant check.
8. 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.
9. 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.
10. Where an employer provides a taxi, or pays or reimburses the fare, for an employee's journey from work to home, section 248 ITEPA 2003 means no income tax arises where either of two sets of conditions is met and the number of previous such occasions in the tax year is lower than 60. The late working conditions are that the employee is required to work later than usual and until at least 9pm, such occasions occur irregularly, by the time the employee stops work public transport has ceased to be available for the journey or it would not be reasonable to expect the employee to use it, and the transport is by taxi or similar private road transport. The car-sharing conditions are that the employee regularly travels to work in a car shared with other employees of the same employer under car-sharing arrangements, and cannot use the car on that occasion because of unforeseen and exceptional circumstances. HMRC stresses that section 248 is not an annual allowance: the conditions must be satisfied on each occasion, and the figure of 60 is a ceiling on the number of journeys that can be exempt even where they are (EIM21831).
11. 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 every Uber receipt without recording the business purpose of each individual journey.
• Claiming a taxi for what is effectively commuting to a regular workplace.
• Treating an employer-paid taxi home as tax-free whenever it is late. Section 248 ITEPA 2003 needs the late working conditions to be met in full on each occasion, including that the employee was required to work later than usual and that such occasions occur irregularly, and it is not an annual allowance of 60 journeys (EIM21831).
• Assuming a stop on the way makes a journey between home and your place of work a business one. 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).

What to keep

• Digital receipts from the taxi or ride-hailing app — most platforms provide a full downloadable journey history.
• A brief note of the business purpose for each journey, added at the time or shortly after.

Real-world example

An employee whose permanent workplace is her employer's office takes a taxi from the office to a one-off client meeting she is required to attend, and back. Neither end of those journeys is her home or a place that is not a workplace, so they are neither ordinary commuting nor private travel as section 338 ITEPA 2003 defines them, and if her employer reimburses the fares, section 289A means no income tax charge arises on them as expenses payments where an equal amount would be deductible. Later that month she is required to work well into the evening, which is unusual for her, and by the time she finishes the last train has gone: the taxi her employer books to take her home can fall within section 248 if the late working conditions are all met that night.

Frequently asked