QUESTION: My job requires that I undertake a lot of travel that is business related, what expenses am I entitled to be reimbursed?
ANSWER: Tax relief for business travel in the UK is an essential aspect of the UK's tax system, designed to support employees who incur expenses while traveling to either temporary or permanent workplaces. The UK tax relief system recognises that such expenses can place a burden on employees, and it seeks to alleviate this burden through a variety of mechanisms.
The primary forms of tax relief for business travel in the UK are the Mileage Allowance Relief and the tax relief on travel and subsistence. We will consider each of these in detail:
- Mileage Allowance Relief (MAR): This is a tax relief for employees who use their personal vehicles for business travel. The UK government sets standard mileage rates that employees can claim tax relief on. These rates vary depending on the type of vehicle and the number of miles driven for business purposes. The standard rates were 45p per mile for the first 10,000 business miles in a tax year and 25p per mile for additional miles. Employers often reimburse these rates to employees, and if not, employees can claim the relief themselves. If you are reimbursed more than the standard rate, this could give rise to an additional tax liability. The above rate apply when you use your personal car, there are different rates when you use a company car for business travel.
- Tax Relief on Travel and Subsistence: Tax relief is available for employees who incur travel and subsistence expenses while on business trips. This relief covers costs like train or bus fares, meals, and overnight accommodation when staying away from your regular place of work. Employees can claim these expenses as deductions against their taxable income, thus reducing their overall tax liability. However, it's crucial to maintain proper records and ensure that the expenses are wholly and exclusively for business purposes. It is normal for these expenses to be reimbursed directly by your employer.
- Temporary Workplace Relief: When employees have to travel to a temporary workplace, they may be entitled to additional tax relief. A temporary workplace is one where an employee expects to work for less than 24 months. In such cases, the costs incurred in traveling to and from the temporary workplace may be eligible for tax relief. However, for the expenses to be deductible, they must be necessary for the performance of the job.
- Permanent Workplace Relief: On the other hand, employees who travel to a permanent workplace are generally not entitled to tax relief. A permanent workplace is considered a place where an employee is expected to work for a period exceeding 24 months. In this case, the costs incurred in traveling to the permanent workplace are considered ordinary commuting expenses and are not eligible for tax relief.
- Other Considerations: It's important to note that certain other factors, such as the provision of company cars, can impact the eligibility for tax relief. Company cars are subject to their own tax calculations, and the use of a company car for business travel can affect the overall tax liability.
In summary, the UK tax relief system recognises the financial burden that business travel can impose on employees. To alleviate this burden, various mechanisms are available to help employees offset the costs associated with business travel, ensuring that they are not unduly penalised for carrying out their duties.
:: Feargal McCormack (f.mccormack@fpmaab.com) is partner at FPM Accountants Ltd (www.fpmaab.com). The advice in this column is specific to the facts surrounding the question posed.
