Financial Focus On...Travel

16th March 2016 by Robin Beadle

The matter of allowable travel expenses is one of the most frequently contested deductions in taxation.  Whether for the self-employed in their accounts, or for employees through the PAYE scheme, HM Revenue & Customs take a keen interest in whether you can claim the costs of going from A to B, either as a one-off or as a regular journey (but thankfully very rarely do they enquire into your choice of transport) 

For the self-employed, the broad rule for travel to be allowable is that it must be “Wholly and Exclusively” for the purpose of the trade.  This phrase is designed to immediately prevent any journey where there could be more than one reason for making it - duality of purpose - although to be fair HMRC do allow sensible apportionment where the non-business use of a journey is minor and infrequent compared to the whole.  HMRC recently won a clear victory over whether a journey is deductible in the Saladin case.  This concerned a freelance medical consultant who worked both for the NHS and privately at a select number of hospitals.  HMRC successfully discounted the taxpayer’s travel costs as, although he based his freelance practice at home, he never saw his patients there.  As his travel to the hospitals was to both perform his duties as an NHS consultant and in his private capacity, his journeys were not solely in the course of his business but were more akin to commuting to regular places of work and therefore failed under the duality of purpose rules – the journeys were to allow him to return home (as well as to his office based at home). 

HMRC also had another argument up their sleeves in the Saladin case in that the regular nature of seeing patients at the three hospitals concerned meant that Dr Saladin had three bases of work (plus his home office) and he was merely commuting between the locations.  He was not, in the words of the legislation, an itinerant worker – someone whose very work took them to different places of work regularly (for example a self-employed surveyor will go from his office - which may be at his home - to see lots of different properties for temporary purposes.  He would not regularly attend the same locations).

For the employed, for a journey to be allowable, it must be “Wholly, Exclusively and Necessarily” incurred in the performance of one’s duties (note the extra requirement).  In its simplest form, as an employee, if your employer tells you to go to deliver something, the case is clear - it is necessary for you to undertake the journey as you have been told by your employer to do it (and you will probably be in trouble if you don’t!)  Provided that you go there and back (and do not deviate on personal errands) there is no problem.  This is excluding, of course, the much more complicated treatment of triangulated journeys.  Any costs incurred should either be borne by your employer or, unusually, if not, you may claim them as a legitimate deduction against your PAYE income.  (This also applies for any shortfall between the mileage rate paid by your employer and the official rate sanctioned by HMRC of 45 pence per mile for the first 10,000 business miles and 25 pence per mile thereafter).  Commuting to a regular place of work, however, is not allowable as it is, like that for the self-employed, undertaken in order to put you in a position to fulfil your duties and not travelling in the course of your duties.  

The question of whether a journey is permitted or not is one that employers have long had to wrestle with.  Reporting the journeys for employers with a lot of workers, however, was generally made easier with the use of P11D dispensations (whereby HMRC would periodically check that an employer was operating the deductibility of expenses correctly rather than force the annual reporting of all expenses paid).  However, following some rather high profile failures in the correct operation of PAYE on expenses – and in particular travel ones – the system of P11D dispensations has now been withdrawn from April 2016.  Employers will instead be expected to report all future travel expenses paid and will be expected to refer to HMRC guidance on whether it is allowable.  The guidance is contained in HMRC booklet IR490 which is some 78 pages long. At the very least, this will be somewhat of an administrative nightmare for those with a large mobile workforce – such as a “Temp” Agency providing a variety of workers at a variety of locations on a variety of contracts.   

With the loss of Dispensation claims for PAYE schemes and the reaffirming that only the genuinely mobile self-employed ought to be able to claim travel (in the eyes of HMRC) the thorny issue of travel expenses has some way to go yet.

For further information on any of the above points or to discuss your tax affairs generally, please do not hesitate to contact Robin Beadle.


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Robin Beadle

Robin Beadle

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