Working away from home, what to watch for when claiming tax relief for travel and accommodation
By Philip McNeill, Head of Taxation (Tax Practice and Owner Managed Business Taxes)
2 December 2020
Working away from home – a tale of two cities.
Work travel is a notoriously tricky issue and two recent Tribunal cases shed light on the situation for both employees and the self employed.
Travel conundrum
Travel expenses when working away from home present the claimant with a number of challenges. For employees, a key issue is whether the new workplace is ‘temporary’, in which case travel is allowable, or ‘permanent’, in which case travel from home to the permanent workplace is normally disallowable as ordinary commuting.
For the self-employed, the ‘wholly and exclusively’ rule (s34 Income Tax (Trading and Other Income) Act 2005) comes into play.
How did two workers fare at Tribunal? One was an employee, the other self-employed. Both worked at a variety of different sites and stayed away from home for a considerable period of time.
Travel to work
Hamish Taylor (Mr Hamish Taylor TC07893 [2020] UKFTT 0416 (TC)) was a self-employed construction worker working for a large engineering company. His home base was Melrose, but he was working in the Swindon area and claimed travel and accommodation expenses for 165 days in the 2016-17 tax year. He claimed just under £30,000 in expenses.
By contrast Narinder Sambhi (Narinder Sambhi TC07717 [2020] UKFTT 231 (TC)) lived in Birmingham and was employed by a national construction company. Initially he worked near home, but soon his work was in and around London. He needed temporary accommodation, Mondays to Fridays, to work on the London jobs.
Clearly in both cases, the travel was related to the requirements of their work.
Yet, in both cases, the Tribunal decided that this was not tax-deductible travel. What went wrong?
An itinerant worker
Mr Taylor argued that his situation was akin to that in Horton v Young (Horton v Young (1971) 47 TC 60), where Mr Horton has successfully argued that he was an itinerant worker. He was a subcontract bricklayer. He travelled to various building sites within 55 miles of his home. Travel was a work expense as he had no fixed work base other than his home.
The judge in Mr Horton’s case had commented that the situation would be different for a ‘commercial traveller living in London whose “patch” was Cornwall’. In such a scenario, the judge envisaged that the cost of travel between London and Cornwall would not be allowable, even if the job was itinerant.
Turning to Mr Taylor’s case, the Tribunal considered the ‘itinerant worker’ argument, but concluded that, for Mr Taylor, ‘the situation was little different if at all from a taxpayer choosing to stay in an hotel closer to his/her workplace during the week so that he/she could spend longer at home, e.g., to help with childcare or to catch a later train’.
Mr Taylor might be itinerant in his work around the Swindon area, but his work base was Swindon, not Melrose. If he chose to work away from his home, that was his choice. It was not an expense ‘wholly and exclusively for the purpose of the trade’.
Single trip versus long-term stay
HMRC apparently accepted that if Mr Taylor had gone to Swindon for one specific contract of limited duration, then the travel and accommodation costs for that would have been deductible. But in HMRC’s view, Mr Taylor had chosen Swindon as a convenient base for his work at different sites.
The Tribunal, looking back to the case of Newsom v Robertson (Newsom v Robertson (1952) 33 TC 452), highlighted that the fact that an item of expenditure may be necessary for an individual to conduct his trade does not, of itself, mean it passes the “wholly and exclusively” test. You must look to the base from which the trade is carried on.
In essence, Swindon was Mr Taylor’s new base, hence the expenses were not deductible.
Employment and temporary workplaces
Mr Sambhi’s case might look superficially somewhat similar to Mr Taylor’s. But Mr Sambhi was an employee and the rules are slightly different.
Travel for necessary attendance at a temporary workplace is allowable (s338 ITEPA 2003). Part of the definition of a temporary workplace is that the duration of the work at each temporary workplace must not be more than 24 months (s339 (5) ITEPA 2003). But there is a restriction. S339(7) mentions a disregard to changes of workplace where there is no substantial effect on the journey.
It was this rule which caught Mr Sambhi out.
Substantial effect on the journey to work
What is remarkable in Mr Sambhi’s case, is that it was the interpretation of this single rule in s339 (7) which denied him the relief. This section says that changes to the place of work are to be disregarded where they do not have ‘any substantial effect on the employee's journey, or expenses of travelling’.
Mr Sambhi’s work covered eleven different projects in and around London over a period from September 2013 to July 2019. During that time he had three temporary London addresses.
Considered individually, the projects were each less than 24 months, and so potentially could be a temporary workplaces. But the Tribunal decided that the rule in s339 (7) required them to consider if, during the combined period, the change in workplace resulted in a ‘substantial effect’ on the journey
While the Tribunal accepted that the initial workplace was a temporary workplace, it concluded that subsequent changes in workplace did not substantially affect the journey.
So relief for travelling and subsistence was due only for the first period of just over 18 months at the initial ‘temporary workplace’. Subsequent costs were not deductible.
The total combined time working on other projects in the London area exceeded 24 months, so there was no temporary workplace.
Conclusion
There were sizeable tax bills to pay in both cases. Factoring in the tax costs of staying away from home could be a make or break, both for employees and the self-employed. Both cases highlight the care needed to make reliable decisions and provide useful guidance on how to get it right.