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After a period of consultation, the Inland Revenue revised the previous longstanding rules for allowable travel and subsistence expenses from 6 April 1998. These notes are a very brief outline of the new rules.
Very helpful details, with many examples, were published in Tax Bulletin issue 32 and Tax Bulletin issue 33 by the Inland Revenue.
These are also available in PDF format requiring Adobe Acrobat - Tax Bulletin issue 32, Tax Bulletin issue 33.
Broadly, tax relief is available for any journeys an employee has to make in order to carry out the duties of their employment except travel which is 'ordinary commuting or private travel'.
In general terms 'ordinary commuting' is travel to a 'permanent workplace'.
We can help you understand the definition and importance of a 'permanent workplace'.
Whether or not there is a tax charge can depend upon the intention of the employer and employee at the time. As a result, one employee may be able to claim tax relief on travelling expenses when another cannot for the identical journey.
All employers and employees should understand the 24 month rule and the 40% rule. Broadly, when you expect a work contract at a particular location to last more than 24 months, tax relief on travelling expenses will not be allowed, because that location has become a permanent workplace, or if 40% of your working time is spent at a second location it can become a permanent workplace and tax relief on travelling expenses will be denied.
We can explain how these rules apply in individual circumstances, and there are many traps for the unwary.
The new rules give relief for many business journeys to and from an employee's home which was not available under the old rules.
Relief is available for the full cost of travel including meals and accommodation, but associated costs such as laundry, telephone calls home, and child-minding are not included. If an employer reimburses these associated costs up to an average of £5 per night spent away on business in the UK, £10 outside the UK, these amounts can be tax free. We can advice on adopting a policy which complies with the special regulations.
We can sometimes help you overcome those Inspectors who resist claims for meals by the self employed, even when they quote such authoritative cases as Caillebotte v Quinn.
An employee can claim tax relief on the full cost of travel even where the employer reimburses part of the cost, for example where the employer reimburses the standard class rail fare, but the employee chooses to travel first class. We can help agree an appropriate claim.
See also -
Additional Passenger Rate - a new
tax free payment from 6 April 2002.
Mileage Rates (Fuel Only) - new advisory
figures for 2002.
Mileage Rates (RAMR) - Revenue Authorised Mileage Rates
for employee owned cars.
Mileage Record - print this
handy form to record your business mileage
VAT in Mileage Allowances - can be
reclaimed by some VAT registered businesses.
Business Cars - the rules on tax relief
Car Policy - is a company or firms car and fuel
worthwhile?
Car Fuel Benefit - changes from 5 April 2003.
Reminder - disclaimer applies. Please feedback your comments. This page was last modified 1 September 2002.