When he took up his present job, my client was told that he would only be working at his present location for 18 months, after which he would be moving to a new building in another location some 5 miles away.
Does the present location qualify as a temporary place of work, i.e. under two years, and will I thus be able to claim his travelling expenses as a deduction against his employment income on the tax return?
(Query T16,035) - Traveller.
When he took up his present job, my client was told that he would only be working at his present location for 18 months, after which he would be moving to a new building in another location some 5 miles away.
Does the present location qualify as a temporary place of work, i.e. under two years, and will I thus be able to claim his travelling expenses as a deduction against his employment income on the tax return?
(Query T16,035) - Traveller.
The current rules for employee travel were introduced by Finance Act 1998 and took effect from 6 April 1998 and make relief available in many situations that would not at first be thought to qualify. However, some traps are lurking.
The rules can be found in section 198 of, and Schedule 12A to, the Taxes Act 1988. In particular, they allow relief for 'qualifying travelling expenses' even if not 'expended wholly, exclusively and necessarily in the performance of the duties of the office or employment' (section 198(1)(a)).
'Qualifying travelling expenses' is defined in section 198(1A) and includes any 'other expenses of travelling which:
* are attributable to the necessary attendance at any place of the holder of the office or employment in the performance of the duties of the office or employment; and
* are not expenses of ordinary commuting or private travel.'
The first limb makes it clear that home-to-work travel is not precluded - it is simply necessary that the journey is attributable to the employee being required to attend a particular place of work. Clearly, an employee will be required to attend a 'nine to five' office and thus any journey to or from that place will satisfy the first limb.
It is therefore necessary to show that these travel expenses are not excluded as 'ordinary commuting or private travel'. These terms are considered in Schedule 12A, to which the paragraph references below refer.
Private travel is any travel between either two non-work places or between a non-work place and an employee's home, whether or not the latter is itself a place of work (paragraph 2(2)). Thus any journey to or from a nine to five office (except when it is also the employee's home) cannot be 'private travel' in this context.
In most cases, such travel will be excluded as ordinary commuting, but this is not necessarily the case here. 'Ordinary commuting' is defined as travel between 'a permanent workplace in relation to the employment' and either:
* the employee's home; or
* a place that is not a workplace in relation to the employment (paragraph 2(1)).
A 'permanent workplace' is any 'place which the employee regularly attends in the performance of the duties of the employment and which is not a temporary workplace' (paragraph 4).
A 'temporary workplace' is any 'place which the employee attends in the performance of the duties of the employment for the purpose of performing a task of limited duration or for some other temporary purpose' (paragraph 4).
Applying the dictionary definitions of 'limited' and 'temporary' would suggest that any period that is known not to be indefinite from the outset would qualify. However, the legislation restricts this by stating that 'a place is not regarded as a temporary workplace if the employee's attendance is in the course of a period of continuous work at that place lasting more than 24 months' (paragraph 5(1)(a)). The statutory context implies that shorter periods should be treated as temporary and, in fact, the Inland Revenue manuals provide an example of a period of 18 months as qualifying as temporary (Schedule E Manual at paragraph SE32081), albeit in a different scenario.
Thus, on an orthodox interpretation of the legislation, the client's home-to-work travel costs are relievable for the first 18 months.
However, there is one provision that 'Traveller' ought to consider. Paragraph 5(3) makes provision for minor changes in workplaces. If such a change does not have, or would not have, any substantial effect on the employee's journey, or expenses of travelling, then the change is disregarded. Untangling the negatives in the provision, it must be shown that the change of workplace materially affects both:
* the journey itself; and
* the costs of travelling.
For example, an employee who lives 2.5 miles west of an office and who, following a relocation, then has to travel 2.5 miles in the opposite direction is unlikely to benefit from any change in workplace from a tax perspective, unless there is a significant difference in travel costs. At the opposite extreme, an employee who commutes by car from Southampton to Watford is similarly unlikely to benefit from a proposed relocation of the workplace to, say, St Albans.
In view of the wide-ranging scope of paragraph 5(3), it is suggested that in most cases relief will be precluded. - Kalonymous.
Under section 198(1) and (1A), Taxes Act 1988, 'Traveller's' client can claim his travelling expenses as long as they are not expenses of 'ordinary commuting' or of 'private travel'. These terms are defined, in a somewhat roundabout fashion, by Schedule 12A to the Taxes Act 1988 and it is ordinary commuting we are concerned with here. The travel will be ordinary commuting if it is to a 'permanent workplace' (paragraph 2(1) of Schedule 12A). A permanent workplace is somewhere an employee regularly attends in performance of the duties and which is not a 'temporary workplace' (paragraph 4). Assuming the client attends regularly, we are concerned with what a temporary workplace is, and that is where the 24-month rule comes in.
A workplace is not temporary if the employee attends it, or is expected to attend it, in the course of a period of continuous work there lasting more than 24 months (paragraph 5(1)(a)). Even if the attendance is for less than that time, the workplace is still not temporary if it is for all or almost all the length of the appointment (paragraph 5(1)(b)). So an employee appointed for a fixed term of less than two years could still be attending a permanent workplace.
Attendance need not be all day every day. Paragraph 5(2) refers to duties being performed to a significant extent at that place. The Revenue's booklet 490 (published on the Revenue website) says at paragraph 3.13 that the Revenue will regard 40 per cent or more of working time as a significant extent.
So on the face of it, 'Traveller's' client's current workplace is not a permanent workplace - the client will only be attending there for 18 months, even though the appointment is for longer. However, he is not quite home and dry yet. Paragraph 5(3) of Schedule 12A deals with changes of place of work. An actual or contemplated change in the place of work is disregarded if it does not have a substantial effect on the employee's journey or travel expenses. This makes sense. If I work at an office and my employer moves to the building next door, my journey to work is hardly changed, and if I were less than 24 months at the old premises, that in itself should not qualify me to claim for my travel.
So the answer could depend on how far the client travels to work. If he previously had to travel seven miles to work on the bus, and after the move he will have to travel only two miles and can walk, that seems to be a substantial change. If he previously commuted 120 miles and now it will only be 115, that seems to be a negligible difference. - Lois Anwin.
Editorial note. The Revenue's leaflet 490: Employee Travel. A tax and NICs guide for employers is a useful resource in this case. Two factors that may be important here are as follows.
* The question seems to imply that the client was a new employee rather than taking up a new position with an existing employer. Leaflet 490 (at paragraph 3.18) does confirm that 'an employee does not need to have a permanent workplace to go back to in order to get tax relief for travel to a temporary workplace'. However, the example at paragraph 3.18 also deals with the circumstance where a new employer 'has not decided where she ("Eunice") will be based'. This appears to be the only example where the employee 'has a new job' and it is clear from that example that she will work temporarily at several offices during a training period. Eunice is, we are told, eligible to claim the costs of travel from home until she is posted permanently at one office.
* Paragraph 4.10 of leaflet 490 notes that tax relief will not be given where the journey to the temporary workplace is not 'significantly different from his or her ordinary commuting journey'. Paragraph 4.11 goes on to state that 'this is intended to be a common sense rule ... but the Inland Revenue will not normally seek to argue that a journey to or from a temporary workplace is substantially ordinary commuting where the extra difference involved is ten miles or more each way'.
