We explored the tax treatment of payments to employees for business mileage in our previous Back to basics articles on HMRC approved mileage rates for business travel and business mileage rates for company cars. Employees might also travel for business via other forms of transport including train, bus, plane or ferry. 

Employers will generally know how to treat the payment or reimbursement of genuine business travel costs to employees (in most cases, no Income Tax or National Insurance is due). However, the rules on what actually qualifies as business travel can be complicated and are often misunderstood.

What qualifies as business travel?

HMRC considers business travel to cover the costs of travel when making a journey as part of an employee’s duties, or when travelling to a temporary workplace where they will perform their duties. This could include car parking, congestion charges, car hire costs and road tolls.

Business travel does not include ordinary commuting to an employee’s permanent workplace or any private travel. Employers therefore need processes to check whether the travel is business travel, otherwise they cannot be certain of the Income Tax and National Insurance implications of paying or reimbursing travel costs. 

When a workplace is a temporary workplace

A temporary workplace is one the employee attends for a limited duration or purpose. For example, if an employee only needs to travel to a workplace for a specific one-off task, it is likely that HMRC might accept the workplace is a temporary workplace.

Tax relief for business travel is based on the total cost of the journey, regardless of whether the employee saves money by not having to make their normal commute to their permanent workplace.

But if an employee attends a workplace more regularly, the employer will need to look more closely as to whether it should be regarded as a permanent workplace, which would mean that the travel costs would not be classed as business travel. Whether a workplace is temporary or permanent will depend on factors such as: how often the employee works there, whether they work there on the same or similar days in their shift pattern, and whether this is for all or most of the time they are in the employment. 

Frequency and pattern of attending a workplace is not the only consideration. Whilst an employee might work in a particular workplace fairly often, they might still be carrying out work with a temporary purpose.

While many employees will have one permanent base (and may travel to other locations as needed), some may have more than one permanent workplace. For example, if an employee works in different premises of the same employer each day of every week, each location would be classed as a permanent workplace. Any travel between those locations during the working day would be treated as business travel, even if the employee’s travel between home and any of those locations would be classed as ordinary commuting.

When a workplace might become or stop being a permanent workplace

Even if a workplace is initially classed as a temporary workplace when an employee starts working there, it may, in some circumstances, subsequently become a permanent workplace. This will be based on the ‘24 month rule’ which HMRC use in guidance on employee travel.

If an employee spends 40% or more of their working week in a workplace and does so, or is expected to do so, for more than 24 months, HMRC will consider that workplace is a permanent workplace. If it is expected that an employee’s assignment to a workplace will last more than 24 months from the outset, that workplace will be treated as a permanent workplace throughout even if the assignment is cut short at a later date. Alternatively, if it is expected that the assignment will last less than 24 months, a workplace will become a permanent workplace from the date the intention changes.

An employee could also change permanent workplace, for example if they change role. The rules apply at a point in time, a workplace that was previously permanent may, in certain circumstances be treated as a temporary workplace in the future. 

For example, if an employee starts working at a new permanent workplace but returns to their previous permanent workplace on a temporary basis, that previous permanent workplace can become a temporary workplace, subject to the usual rules.

Keeping records

In the event of a compliance visit, HMRC would look at each case based on its own circumstances when forming a view on whether an employee’s workplace was temporary or permanent. Factors that would be considered include where the employee spends their working week, where business contacts would expect to be able to contact the employee, whether the employee has an office or desk in each location and what tasks the employee does in each location.

Employers should keep detailed records of payments to employees for business travel, which should be supported by expense claims.

Further guidance

For more information, or for details of how to treat more complicated scenarios, HMRC have a more detailed guide on expenses and benefits for directors and employees and separate guidance on Tax and National Insurance contributions for employee travel.

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.   

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