Most employees can identify their permanent place of work because it is where they regularly go to work. However, post-Covid, many workers work primarily from home, splitting their time between home and office. With more employees having the legal right to request flexible working arrangements, tax issues may arise concerning the reimbursement of travel expenses.
Particular areas of concern include:
- expenses relating to temporary workplace arrangements;
- ascertaining whether travel can be claimed between two workplaces; and
- understanding the definition of ‘ordinary commuting’, for which no tax deduction is available.
Temporary workplaces
HMRC permits travel expenses to be tax deductible should the employee be required to work from a ‘temporary workplace’. HMRC defines a ‘temporary workplace’ as a location where ‘an employee attends for the purpose of performing a task of limited duration or for some other temporary purpose’. HMRC looks for irregularity and limited time, e.g., if an employee based in Birmingham is required to work in London for a year, the London location would qualify as a ‘temporary workplace’ under these rules, making all travel expenses tax deductible.
However, there is a further rule preventing a workplace from being a temporary workplace where an employee attends for a period of continuous work that lasts, or is likely to last, more than 24 months (the ’24-month rule’). ‘Continuous work’ is defined by section 339(6) ITEPA 2003 as a period during which the duties of the employment are performed to a significant extent at that place. HMRC views ‘significant’ as when the employee spends or is expected to spend 40% or more of their working time at that particular workplace. In such cases, the workplace is classified as permanent, and travel between that location and home would be regarded as ordinary commuting, making it non-tax deductible.
Should it be known from the outset that a contract at an alternative location will last at least 24 months, travel expenses cannot be claimed from the start. However, if the duration of the contract is uncertain, tax relief can be claimed if it is assumed that the agreement to work at the temporary location will not extend beyond 24 months.
Expectation
Complications can arise when expectations change. In the Employment Income Manual, HMRC gives an example of an employee who has worked for their employer for ten years and was sent to perform full-time duties at a workplace for 28 months. In this case, the workplace is deemed permanent because the attendance is continuous, and it is initially expected to exceed 24 months. As a result, the 24-month rule means that no travel expenses can be claimed as tax deductible.
However, if after ten months the assignment is reduced to 18 months, employees cannot claim deductions for travel costs during the first ten months, but can claim for the final eight months. Due to the initial expectation that the assignment would meet the 40/24 test, the workplace is considered permanent for the first ten months, becoming a temporary workplace afterwards, even if the actual duration turns out to be different.
Why temporary workplace rules matter and common mistakes
Temporary workplace rules are one of the most common areas of confusion for both employees and employers, particularly with the rise of hybrid and flexible working. A frequent mistake is assuming that any short-term assignment automatically qualifies as a temporary workplace. In reality, HMRC places significant weight on expectation, not just actual duration.
Another common issue arises where employees split their time between locations. Spending 40% or more of working time at a particular site can easily tip a workplace into being classed as permanent, even if the role feels temporary in practice. Once a workplace becomes permanent, travel between home and that location is treated as ordinary commuting and is not tax deductible.
For employers, incorrect treatment of travel expenses can result in PAYE and National Insurance exposure following an HMRC review. For employees, it can lead to disallowed expense claims and unexpected tax bills.
Understanding how the 24-month rule interacts with changing expectations allows both parties to apply the rules correctly, claim relief where appropriate, and avoid errors that may only come to light years later during an HMRC enquiry.
FAQs
Practical point
While a home office can be a worker’s permanent workplace, allowing for the possibility of claiming travel expenses to a company’s office, HMRC has stated that it usually views home office working as a ‘personal choice’ rather than a business requirement. Consequently, HMRC tends to disallow any expense claims related to home office working.
You may also like to read: Tax implications of employer-provided vans
Temporary workplace rules can be complex, particularly with hybrid and flexible working arrangements.
If you would like to confirm whether travel expenses are allowable or ensure your expense policy is HMRC-compliant, feel free to contact AccounTax Zone for tailored advice.
Partner Note:
