TRAVEL & SUBSISTENCE

By Alistair Byrne, of JWP Creer, Chartered Accountants and Business Advisers

THE tax deductibility of travel and subsistence payments is commonly misunderstood by employers, employees and the self-employed.

It is a complex area of legislation with two sets of rules under the same piece of legislation, depending on whether someone is self-employed or employed. There is also a considerable amount of case law to back up the legislation.

Fundamentally, travel costs between where you live and where your base of work is, generally two different places, is not tax deductible.

In addition, if a person in self-employed and maintains an office at home, and travels to various places in the course of his work, he will only get tax relief for expenditure ‘wholly and exclusively’ incurred for business purposes. So incidental costs, for example, staying in a hotel should be allowed but arranging for an apartment, which could be used to entertain family and friends, will not.

There are also complex rules regarding the point in time when a temporary workplace (you can claim towards) becomes a permanent or semi-permanent workplace (which would mean no tax relief would be available), for example maintaining an office at home may not be sufficient if you habitually travel to another place to work.

The same applies for subsistence. It is generally accepted that if travel is not allowable, then food costs are also not allowable.

If a person is employed, the legislation is moderately clearer. Where a person has a permanent workplace, travel costs etc to this place will not be allowable.

Travel expenses are, however, allowable from home to the temporary workplace such as travelling to a satellite office, and subsistence payments can also be allowed. Again there is a line to be drawn where a temporary workplace can become a permanent one.

Workplace and lifestyle patterns have changed and legislation needs to be adaptable to suit more flexible working practices. However, the government announced in the 2016 Budget that they will not be making changes in the foreseeable future.

It is clear that the practical application of the legislation is in need of simplification.