Tax rules on other types of travel and related expenses (490: Chapter 8)

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8.1

This chapter explains the tax treatment of some other types of travel and related expenses. The National Insurance contributions treatment will in most cases follow that for tax.

You can find more information in the CWG2: further guide to PAYE and National Insurance contributions.

Incidental overnight expenses

8.2

An employee making a business trip may spend money on items such as private phone calls, laundry and newspapers. These are not ‘travel expenses’ – they’re personal expenses incurred while travelling.

An employee is not entitled to tax relief for personal expenses of this kind under the normal travel rules. But there is a separate rule which gives tax relief for these expenses in certain circumstances.

8.3

Employees who stay away overnight while travelling on business, or attending work-related training of the kind described in paragraphs 8.7 and 8.8, are entitled to tax relief for personal expenses they incur where these are paid for or reimbursed by, or on behalf of, their employer.

Employees are not entitled to tax relief for expenses they pay out of their own money which their employer does not reimburse.

8.4

Employees are entitled to tax relief for these expenses if the employer pays or reimburses no more than:

£5 for every night spent away on business in the UK
£10 for every night spent away on business outside the UK

Example

Sally stays in a hotel in Peterborough for 3 nights as part of a business trip. During that time she spends £3.50 on personal telephone calls and £1.50 on newspapers. Her employer reimburses these expenses.

Sally is not entitled to tax relief for these expenses under the normal travel rules but she is entitled to tax relief under the separate rule for incidental overnight expenses.

Example

Mary stays in a hotel in Cambridge for 4 nights as part of a business trip. Her employer pays her £5 for each night to cover her incidental expenses even though Mary does not spend the full amount.

Mary is not entitled to tax relief for these payments under the normal travel rules but she is entitled to tax relief under the separate rule for incidental overnight expenses up to the amount of expense she incurred.

The additional amounts over and above her actual expenses are chargeable to tax and National Insurance contributions as earnings from her employment.

8.5

Where the employer pays more than the amounts shown in 8.4, unless there is an established policy which needs employees to repay any excess over these amounts (and repayment is made within a reasonable time), the employee is taxed on the full amount paid by the employer and is not entitled to any tax relief to set against that amount.

Example

Philip stays in a hotel in Sheffield for one night as part of a business trip. His employer gives him an allowance of £6 to spend on personal expenses. Philip is taxable on the whole of the £6.

He is not entitled to any tax relief under the separate rule for incidental overnight expenses because his employer has paid him more than £5 a night.

8.6

An employer should apply the limits specified to the whole period an employee spends away not to each night separately.

Example

Jackie stays away on business in Exeter for 3 nights. Her employer reimburses the following personal expenses:

Night 1	£5.50
Night 2	£6.00
Night 3	£2.50
Total	£14.00

Jackie is entitled to tax relief for all these expenses. Her employer reimbursed more than £5 on nights 1 and 2 – but over the period of 3 nights Jackie’s employer did not reimburse more than £15 in total.

Training courses provided by employers

8.7

Employees who travel to work-related training where the cost of their journey is paid for or reimbursed by, or on behalf of their employer, are entitled to tax relief for the amount paid or reimbursed by their employer.

They’re also entitled to tax relief for incidental overnight expenses where the appropriate conditions are met (see paragraph 8.3).

Employees are not entitled to tax relief for overnight incidental expenses they pay themselves and which their employer does not reimburse.

8.8

The definition of work-related training is wide enough to cover most types of training in genuine workplace skills. But it does not include training offered as a reward or an inducement.

A sales techniques course in the UK for a company’s sales team will be work-related training but a conference in the Seychelles for the firm’s top 10 salesmen will not.

Example

Patrick is a cook working in Preston. His employer pays for him to go on a 10-month course at a college in Blackpool to improve his catering qualifications.

He travels to Blackpool daily and his employer pays him travel costs. Patrick is not taxed on these payments.

Example

Sandra is a sales administrator working in Evesham. As a reward for meeting all her targets, her employer pays for her to take a course in genealogy at a college in Birmingham.

No tax relief is due in respect of the travel costs that Sandra incurs in attending this course as the training is not related to her employment.

Removal expenses

8.9

Where an employee has to move home because of their work, the employee is entitled to tax relief for the first £8,000 of qualifying removal expenses where these are paid or reimbursed by, or on behalf of the employer.

Employees are not entitled to tax relief for expenses they pay out of their own funds and which their employer does not reimburse.

8.10

Some of the removal expenses for which tax relief is available include the cost of making certain journeys and related subsistence.

For example they might include:

preliminary visits to the new location
travelling between the old home and the new workplace
travelling between the new home and the old workplace (where the employee moves house before moving jobs)
temporary living accommodation
travelling between the old home and the temporary living accommodation
travelling from the new home to the temporary living accommodation (where the employee moves house before moving jobs)
travelling from the old home to the new home when the employee moves house

Example

Sanjay’s employer needs him to move from Cardiff to Norwich. He travels to Norwich on 3 occasions to look at houses.

His employer reimburses the cost of 2 of these visits but not the third. Sanjay is entitled to tax relief for the cost of 2 of these visits but not for the third because his employer did not reimburse the cost.

Sanjay starts work in Norwich and stays in bed and breakfast accommodation for around 3 months until he sells his house in Cardiff.

His employer pays for his journey to Norwich and his accommodation. Subject to the £8,000 limit, Sanjay is entitled to tax relief for both the full cost of his journey to Norwich and the cost of his accommodation.

Example

Adam’s employer requires him to move from Sheffield to Coventry. He travels to Coventry on 4 occasions to look at houses. His employer reimburses the cost of these visits.

Adam is entitled to tax relief for the cost of all of these visits because his employer reimbursed the cost.

Adam starts work in Coventry and stays in rented accommodation for around 6 months until he sells his house in Sheffield.

His employer pays for his journeys to Coventry, his temporary accommodation and his qualifying removal expenses.

The total cost to the employer is £9,500. Adam is entitled to tax relief for the first £8,000 of costs paid by his employer, but is chargeable to tax and National Insurance contributions on the excess.

See the Expenses and benefits for directors and employees - a tax guide: 480.

Directors who are acting for a professional practice

8.11

Professional people such as solicitors are sometimes made directors of companies for their professional practice and not for any other reason.

They’ll not have any direct or indirect financial interest in the company.

8.12

Where this happens the expenses they incur in carrying out their duties as a director are treated for tax purposes as expenses incurred by the professional practice. This means the professional practice gets tax relief for these expenses when its taxable business profits are worked out.

8.13

Where someone is a director acting for a professional practice and the company pays for reasonable travel expenses, the director is entitled to tax relief for those expenses provided the professional practice does not claim tax relief for them when it works out its taxable business profits.

Example

Melissa is a solicitor who is a partner in a local firm. She is executor to the estate of Saul who was the only shareholder in a property holding company. As part of her duties as executor Melissa becomes a director of the company and arranges to sell it.

She visits a number of people who are interested in buying the company and the company reimburses her for the cost of these journeys.

Melissa is entitled to tax relief for the expenses provided that her firm does not claim tax relief for these expenses when it works out its taxable business profits.

Directors who are not paid

8.14

The director is entitled to tax relief for any payments they receive to cover the cost of travel and subsistence where:

a director gives their services to a company without remuneration
the company is a not for profit company – for example, a company owning a hall or sports ground or running a club

Example

Sean is a director of a company which runs the local parish carnival. The company is not run with a view to dividends and Sean is not paid a wage for the work he does.

He visits a number of marquee specialists to discuss his requirements and the company reimburses his travelling expenses. Sean is entitled to tax relief for the reimbursed expenses.

Disruption to public transport caused by strikes

8.15

Sometimes when public transport is disrupted by a strike or other industrial action an employee will incur extra costs travelling to or from their place of work or staying in a hotel or other overnight accommodation at or near their permanent workplace.

Where the employer provides reasonable amounts towards the cost or meets the costs directly (for example, through a block booking) the employee is entitled to tax relief for the amount paid by their employer.

But where an employee spends more on ordinary commuting or subsistence because of a strike and the employer does not reimburse that sum, the employee is not entitled to tax relief for the extra expense.

Example

Hilary travels to work in Southampton by train and bus. Public transport is disrupted as a result of a strike. Hilary cannot get home easily and her employer agrees to pay for her to stay in a hotel near her place of work.

Hilary is entitled to tax relief for the cost of the hotel room provided by her employer.

Late night travel home

8.16

Where an employer provides free transport or pays for transport for an employee’s journey between home and a permanent workplace the employee will:

be taxed on the benefit of the free travel
not be entitled to tax relief to set against that benefit

8.17

However, an employee will be entitled to tax relief where they’re occasionally needed to work late, but:

those occasions are irregular
by the time the employee can go home:
- public transport has stopped
- it would not be reasonable for the employer to expect the employee to use public transport, for example where the low level of availability or reliability of services at that time of night mean that a journey using public transport would be likely to take much longer than a normal journey between work and home

Where all these conditions are met the employee is not taxed if the employer provides a taxi, hire car or similar private transport to take them home:

‘work late’ means working until 9pm or later
‘irregular’ means a pattern that is not predictable – for example, if late night transport is provided every Friday this is not irregular

8.18

Tax relief is not available under this rule:

where employees work late by choice
where late working is a regular feature of an employee’s job – for example people employed in restaurants, clubs and pubs whether on a shift basis or not, or those on regular call-out duty
where employees incur expenses on travelling home late but the employer does not reimburse those expenses
for more than 60 journeys in a tax year

Example

Jamir has a job providing support for an office computer system. He normally works 8am to 5pm and travels to work by bus. Three or four times a year he is required at short notice to stay at the office until 10pm to solve problems with the computer system.

The bus service stops running at 8pm so when he needs to work late his employer pays for a taxi to take him home. Jamir is not taxed on the benefit of the free transport home.

8.19

Where an employee who regularly travels to work as part of a car sharing scheme finds that due to unforeseen and exceptional circumstances they cannot on a particular occasion get home in the shared car, an employer can pay or provide for the employee’s journey home tax-free and National Insurance contributions-free.

8.20

Unforeseen and exceptional circumstances include those where the employee travels home at their normal time but, for reasons beyond their control, they cannot travel in the shared car at that time.

8.21

They do not include circumstances where, on any occasion, inability to travel home in the shared car might reasonably have been anticipated before the employee set off for work that day. Nor is this allowed on more than 60 journeys in a tax year.

Any journeys that qualify for tax relief under the late night travel rules must be included in working out whether the limit of 60 journeys has been reached.

People with disabilities

8.22

Where an employee with a disability:

is provided with a means of travelling to or from their place of employment
receives financial assistance with the cost of travelling between home and their permanent workplace

The employee will not be taxed on this benefit.

But if the cost is not met by their employer, or some other third party, the employee is not entitled to tax relief.

Expenses of a spouse accompanying an employee on a business trip

8.23

Where an employer pays for an employee to take their spouse on a business trip, the employee will be taxed on the cost of the spouse’s travel.

Tax relief may be available where the spouse has some practical qualifications directly associated with the purpose of the trip and which they regularly use to assist the employee.

Tax relief is also normally available for a spouse’s expenses where the employee’s health is so poor that it would be unreasonable to expect them to travel alone.

Car parking

8.24

Where an employer provides a free parking space or reimburses the cost of a parking space at or near an employee’s place of work, there is no tax charge.

Employees are not entitled to tax relief for these costs if they pay them out of their own money which their employer does not reimburse.

Offshore oil and gas workers

8.25

Workers on offshore oil and gas rigs have to travel from the mainland to the rig. Their employer or a third party usually provides free transport or pays for this part of their journey. Where this happens, the employees are entitled to tax relief for the full cost of the transport provided.

8.26

Sometimes the transport from the mainland to the rig leaves at a time that means the employees have to stay overnight on the mainland close to where the transport leaves.

Where this happens and the employer provides, or pays for, reasonable accommodation and subsistence, the employees are entitled to tax relief for the cost of that accommodation and subsistence.

No tax relief is available if the employee pays for accommodation and subsistence themselves and this is not reimbursed by the employer.

Working rule agreements

8.27

These agreements are drawn up between employers’ federations and trade unions. They set out the terms and conditions of a large number of employees in the construction and allied industries.

We have agreed not to tax some of the modest travel and subsistence allowances employees receive under these agreements.

An employee who receives tax-free allowances under a working rule agreement is still entitled to tax relief under the ordinary rules.

The employee is entitled to tax relief for the:

full cost of the business journeys, less
amount of tax-free allowance they received

Example

Sophie is employed by a construction company. She works on many different sites in the course of a year and does not have a permanent workplace. One week she spends 4 days working on a site in Ipswich.

She travels to Ipswich by train and spends 3 nights in bed and breakfast accommodation.

Her employer pays her £65 tax-free travel and lodging allowances under the terms of a working rule agreement.

Sophie spends a total of £70 on her travel and subsistence in Ipswich. She is entitled to tax relief under the ordinary rules for £5 which is:

the full cost of her business journeys	£70
less the amount of tax-free allowances she received	£65
total	£5

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Tax rules on other types of travel and related expenses (490: Chapter 8)