Business journeys tax relief (490: Chapter 5)
Find out what amount of tax relief your employee is entitled to for business journeys.
The amount of tax relief
5.1
Where an employee’s business journey qualifies for tax relief the amount of tax relief to which they are entitled is the full cost of that business journey.
In working out the full cost of a business journey, take no account of any savings an employee realises by not having to make their ordinary commuting journey.
There are special rules for working out the tax relief on motoring expenses paid to employees who use their own vehicles for business travel - go to paragraph 9.12 of Employers’ reporting requirements (Chapter 9) .
Tax relief only against earnings from same employment
5.2
Tax relief is generally only available where an expense is met out of the income from the relevant employment. Where an employee is entitled to tax relief for expenses incurred but the income from that employment does not cover those costs, tax relief is limited to the amount of that income.
We cannot give tax relief against other income – such as investment income or income from another employment. But where a group of companies is involved go to paragraph 2.8 of Whether or not travel qualifies for tax relief (Chapter 2).
Example
Mark is a teacher. He is also separately employed as coach to the local youth football team, for which he is paid £100 a year.
He incurs expenses of £1,000 a year travelling to away matches which he pays out of his own pocket.
Mark can only get tax relief for £100 of his expenses as he only has £100 of pre-tax income from his coaching work.
Tax relief only for expenditure actually incurred
5.3
Tax relief is available only to the extent that an expense has actually been incurred.
Example
Angela has to travel on business. Her employer pays her a travel allowance sufficient for the purchase of an airline ticket. Angela buys a rail ticket at lower cost.
Tax relief is limited to the expenditure actually incurred – the cost of the rail ticket.
Angela is taxable on the payment from her employer but tax relief is available for the expenditure actually incurred.
Example
Matthew is sometimes required by his employer to stay away overnight in London on business. His employer makes payments to him to meet the cost of hotel accommodation when he has to stay away.
However, instead of booking into a hotel, he stays at a friends house in Fulham.
Matthew is taxable on the full amount received from his employer and no tax relief is available to set against the payment he received for overnight accommodation because no expense has been incurred.
Example
Fiona has to travel on business. Her employer pays her a travel allowance sufficient for the purchase of a standard class railway ticket. Fiona buys a first class ticket.
The allowance paid is taxable but tax relief is available for the full expenditure actually incurred – the cost of the first class ticket.
Subsistence
5.4
Travel expenses includes both the actual costs of travel together with any subsistence expenditure and other associated costs that are incurred in making the journey.
This includes:
- any necessary subsistence costs incurred in the course of the journey
- the cost of meals necessarily purchased whilst an employee is at a temporary workplace
- the cost of the accommodation and any necessary meals where an overnight stay is needed - this will be the case even where the employee stays away for some time
The following examples demonstrate when business journeys begin and end.
Example
Chris is needed to spend 3 months in 2013 to 2014 working at the site of one of his employer’s clients. He travels to the site each Monday morning, stays in a hotel close to the temporary workplace and travels home late each Friday evening, eating dinner on the way.
During the week he takes some of his meals in the hotel and others at a nearby restaurant. The cost of the accommodation and all the meals are part of the cost of his business travel.
However if he were to travel home on a Wednesday evening, spend the night at home and take his wife out for a meal no deduction would be permitted for the cost of that meal.
This is because the qualifying business journey ends when he arrives home and starts on Thursday morning when he sets off to travel back to the site.
Example
Michael is employed as a travelling salesman visiting customers across the UK throughout the day. He travels to his first customer direct from home and travels home directly from his last customer of the day.
Each day he buys and eats lunch whilst travelling between customers.
Michael is travelling in the performance of his duties. Therefore the costs of his travel both to and from home and between customers together with the cost of his meals incurred whilst en route will be allowable.
5.5
Tax relief is only allowed for subsistence costs which are attributable to the business travel, such as costs incurred in the course of the journey which are additional to any costs that the employee would ordinarily incur if they were not travelling on business.
For example, tax relief would be allowed for the cost of a sandwich bought at a station whilst travelling on business but not for the cost of a sandwich prepared at home and consumed whilst travelling as this is not a cost incurred in the course of the journey.
Example
For several weeks, William performs duties of his employment at a temporary workplace close to his home. He chooses to stay in a hotel as he is having some decorating done at his home.
The stay in the hotel is not attributable to his travel to and from the temporary workplace and so he is not entitled to tax relief for the costs.
Example
Andrew normally works in Bristol, but his employer asks him to spend a few days covering for a colleague in the Bath office. The Bath office will be a temporary workplace.
As he normally prepares a packed lunch at home, Andrew continues to do so for the days he is travelling to work in Bath.
No tax relief is available for the cost of Andrew’s lunches (even if they could be precisely identified) as he did not incur the cost in the course of his journey.
5.6
Example
Claire performs the duties of her employment at a series of temporary workplaces. She has no permanent home. She stays in guest houses and hotels near wherever she happens to be working. This is the only accommodation available to her.
Claire has to live somewhere and the costs of accommodation are attributable to her general need for shelter, rather than her attendance at a particular workplace. Her travel is between her temporary accommodation and her temporary workplace.
The cost of accommodation is not attributable to the cost of that travel so she is not entitled to tax relief for the cost of the accommodation.
Claire is, however, entitled to tax relief for the cost of travel between her temporary accommodation and her temporary workplace.
This is an example of an itinerant employee who has no permanent home and makes her home wherever her work happens to take her.
She cannot deduct the cost of her accommodation because she incurs no additional expense.
5.7
In addition, no tax relief is available for costs incurred as a consequence of the travel that are not incurred in travelling, but result from the circumstances of the employee, for example the cost of putting a pet dog in kennels while away from home.
Other costs incurred while travelling on business
5.8
Travel costs can include other costs that form an integral part of the cost of the business journey. This could include toll fees, congestion charges, vehicle hire charges, car parking or the cost of temporary accommodation.
Some expenditure that an employee might incur while making a business journey is not expenditure due to that journey and so no tax relief is available under the general travel rules.
This will include, for example, private telephone calls, newspapers and laundry. Tax relief for these costs may be available as incidental overnight expenses (go to paragraph 8.2 of Tax rules on other types of travel and related expenses (Chapter 8).
In addition, no tax relief is due for costs arising as a result of the business travel that stem from the personal circumstances of the employee. For example, no tax relief is due for the cost of a babysitter that the employee may need to pay while away from home.
Where tax relief for business travel using an employee’s own vehicle or bicycle is given at statutory mileage allowance relief rates a distinction must be drawn between costs that are incurred in connection with the use of that vehicle and other costs of business travel.
No tax relief is permitted for actual costs that are incurred in connection with the use of that vehicle. This might include petrol, oil, servicing, repairs, car hire charges and other costs of using that vehicle.
All of these costs are replaced by the statutory rate.
Choice of route
5.9
To qualify for tax relief, a journey does not have to be made by the shortest route if another route is more appropriate – for example, using the M25 to go round London rather than driving through the middle.
Similarly, a business journey will still qualify for tax relief if the employee makes a short detour for a meal.
5.10
There are limits to the flexibility allowed. If an employee makes a significant detour to visit a particular restaurant we would regard that part of the journey as private.
An employee travelling on business who makes a detour for private purposes will still be entitled to tax relief for the full cost of the business part of the journey but not for the private detour.
Example
During the course of a business trip, Tom takes the opportunity to visit his mother. To the extent that Tom’s journey would otherwise qualify for tax relief, the fact that he makes a social call on the way does not affect the tax relief available.
However, if the social call involves a significant detour, that detour is not in the performance of the duties of his employment and not due to attendance at a particular workplace.
So no tax relief is available for the cost incurred in making the detour.
5.11
Where, in the course of a business journey, an employee incurs additional expenditure through genuine error, we’ll regard that expenditure as a cost of business travel rather than personal expenditure.
Example
Christine has to travel on business from her home in the south of England to Scotland. She travels by train. In error, she travels up the West Coast when her ticket is valid only for the East Coast route.
She incurs substantial extra cost because she has to buy another ticket.
She is entitled to tax relief for this expenditure as well as the cost of her original ticket as part of the cost of her business travel.
Scale of expenditure
5.12
The cost of business travel will not normally have any bearing on whether or not tax relief is available. For example, we would not seek to disallow first class rail travel on the grounds that only standard class was necessary for a journey.
5.13
Where the travel arrangements are unusually lavish, we will consider whether, on the facts of the case, the expenditure is really due to business travel, or is, for example, some sort of reward, or part of their normal remuneration.
However, we will not seek to deny tax relief for the cost of a journey, hotel room or meal simply because a less expensive alternative is available.
Cost of journeys by car – employee’s own vehicle
5.14
The same rules apply for working out what types of journeys in employees’ own vehicles qualify for tax relief as for journeys by any other form of transport.
There are, however, special rules for working out the amount of tax relief that an employee can get for business travel in their own vehicle. For more details of how to work out the tax relief go to the Expenses and benefits for directors and employees - a tax guide: 480.
These rules also determine the way in which employers report details of mileage payments to us. For more information read the CWG2: Further guide to PAYE and National Insurance contributions.
These rules provide for a maximum amount that can be paid free of tax to employees using their own vehicles for business travel.
If employers pay more than the maximum amount, the excess must be added to any other earnings the employee receives in the earnings period in which they make the payment of motoring expenses.
The employer should work out any tax due on the employee’s total earnings.
5.15
To work out whether tax is due on mileage allowance payments multiply the number of business miles travelled by the employee by an approved rate. This will be the maximum amount that can be paid free of tax.
Then compare the amount that has been paid to this maximum. Tax is due on any amount over the maximum. Go to the Expenses and benefits for directors and employees - a tax guide: 480.
5.16
For cars and vans the rate to use is our approved mileage rate. This is currently 45p per mile for the first 10,000 business miles and 25p per mile thereafter.
5.17
Employers can also pay employees travelling on business a tax-free and National Insurance contributions-free allowance for passengers who are also travelling on the employer’s business. For this payment to be free of tax and National Insurance contributions the passenger must also be an employee for whom the journey is business travel.
For more details of how to work out the tax relief go to the Expenses and benefits for directors and employees - a tax guide: 480.
Company cars and vans
5.18
An employee who is provided with a company car or van, or with fuel for private use in a company car or van, is taxed on that benefit.
You can find the rules for when a tax charge arises, and for working out the amount of tax charge, in Chapters 11 to 15 of the Expenses and benefits for directors and employees - a tax guide: 480.