Temporary Workplace Rules
When can you claim home to work travel expenses as an employee?
Ordinary Commuting
Ordinary commuting is never tax deductible for either employer or employee.
In general terms it is where you start off from home, travel to the same work site every day to complete work and then return home, and continue to do so until your employment is terminated.
When travel is classed as “ordinary commuting” the workplace is a“permanent workplace” i.e. one that does not change within the employment.
If you remain at the same location for all your employment then it is “ordinary commuting” and is not a business expense as you are working at a “permanent workplace”.
Temporary Workplace
For travel expenses to be a business expense the workplace attended must be a “temporary workplace”. A “temporary workplace” is defined by legislation in Section 339(3) ITEPA 2003 and explained by Her Majesty's Revenue and Cuatoms at EIM32075 .
A workplace is a temporary workplace if you go there only to perform a task of limited duration or for a temporary purpose. So even where you attend a workplace regularly, it will be a temporary workplace and so not a permanent workplace, if you attend to perform a task of limited duration or other temporary purpose.
In Kirkwood v Evans (74TC481) the statutory definition was explained in the following terms.
"Having regard to the provisions of [Section 339(3)] the definition of a temporary workplace is intended to encompass places of work which require the employee's attendance for a limited or temporary purpose within a course of employment (whether of limited duration or otherwise)."
A worker attending a temporary workplace will work for one employer and will move from one workplace to another during that employment.
An owner-director of a limited company engaged on various assignments for it, is attending a temporary workplace if they attend for less than 24 months.
The director needs to attend more than one workplace during the employment with the limited company for a workplace to be a temporary one. If a director only attends one workplace during the whole of the employment with the limited company that workplace will not be a temporary one and the travel expenses will not be claimable.
The duration attended at a temporary workplace must be less than 24 months in total.
If the workplace is attended for more than 24 months it becomes a permanent workplace from the start of attendance at that workplace and no expenses from the start of the assignment are claimable as travel expenses.
The “24 month rule” is part of Section 339(5) and (6) ITEPA 2003 and HMRC give guidance at EIM32080 .
Permanent Workplace
If the employment itself is for a limited duration and only one workplace is attended then that workplace is the permanent workplace for that job, even if it is just for one day for one workplace for one employer.
If an employment is for a specified period of time or for a particular project situated at one workplace then HMRC considers this workplace a permanent one, and travel expenses will not be claimable.
Expectation
HMRC will take note of evidence suggesting it was expected that the workplace would be a permanent one, and will disallow travel expenses claims where the expectation is that the workplace will be permanent.
So if a contract is signed for more than 24 months for a project on one location, that location will be a permanent workplace from the start.
If the contract is for a shorter period, say 9 months, but there is evidence to suggest that the workplace and the contract will remain the same for at least 24 months, then again the expectation is there and the workplace is a permanent one.
Employment
Where an owner-director is employed by his company to complete a series of assignments for it, the director will receive a salary for that employment.
It is important that between assignments the director continues to be paid his regular salary to demonstrate that the employment, from a tax perspective, is maintained between assignments.
The 40% rule
Where the workplace is attended for more than 24 months, a “40% rule” is applied to it.
Where the total time spent at one workplace is 24 months then, if 40% or more of the available worktime during that 24 months was at one workplace, the travel expenses are unclaimable from the point at which 24 months has been completed.
This is important in where an employee works on one site, moves to another site and then returns to the first site.
If 24 months have been completed on the one site in total, then if 40% of the available time has been on that one site, then travel expenses cease to be claimed from the point where 24 months are exceeded.
As an example of how this works say an employee had the following engagements:-
- 6 months at workplace 1,
- 6 months at workplace 2,
- 6 months at workplace 3,
- 12 months at workplace 1,
- 6 months at workplace 4,
- 6 months at workplace 1
- then a final 6 months at workplace 1
In the first 6 months workplace 1 is viewed as a temporary workplace
In the second 6 months workplace 2 is viewed as a temporary workplace
In the third 6 months workplace 3 is viewed as a temporary workplace
In the next 12 months workplace 1 is viewed as a temporary workplace as 18 months have been completed on workplace 1
In the next 6 months workplace 4 is viewed as a temporary workplace
In the next 6 months workplace 1 is viewed as a temporary workplace.
In the next 6 months workplace 1 is viewed as a permanent workplace from the start of this period as a total of 24 months have been completed at this workplace out of 42 months (57%) at the beginning of the period. At the end of the period a total of 30 months have been completed out of 48 months in total (62%) and so at the end of the period workplace 1 is still a permanent workplace.
Depots/HQ’s/Base Location
Where a director travels to an HQ/depot or is based at a client location and then goes to a workplace to fulfill an assignment, if the depot/HQ/base location is the same , but the workplace is different, it is likely that the travel to the depot/HQ/base location will be ordinary commuting.
Defining the difference between two workplaces
For a workplace to be different there must be a difference between the journeys to the different workplaces.
HMRC give the following example:
"A computer consultant is the only employee of a company that she controls. She is a specialist in banking systems. She spends 18 months working full-time at the headquarters of a merchant bank in Lombard Street in the City of London. She then moves next door to design a new computer system for a different bank where she expects to stay working full-time for 22 months. After that assignment she moves to a bank close by on Cheapside for 17 months. The employee expects to work continuously in the ‘Square Mile’ albeit on the premises of different banks. Her travel from home to work will be broadly the same every day. No deduction is due for the cost of travel between her home and any of these workplaces"
If a different journey is undertaken it is more likely that each workplace is different.
The question of “how different a journey ?” is subjective and if you have any doubts then take advice, but basically if you end up at the same public transport terminal or you use the same roads, then it is likely you are at the same workplace.
HMRC give guidance on this at SE32089 and also detail further examples of where Paragraph 5(3) Schedule 12A ICTA 1988 would apply in SE32280 where they give the following example:
"An employee may change his or her workplace without that change having any substantial effect on his or her journey to work. If a change of workplace does not have any substantial effect on the employee's journey, or the expense of that journey, the change is ignored. The two workplaces are treated as a single workplace. So if an employee changes his workplace from Cardiff to Edinburgh that change would be recognised, while if the change is only to the office next door it would not be recognised."
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