No turning back

Travel rules to remain unchanged

The current rules that govern tax relief for employee business journeys were last updated in 1998 and since then, developments in technology have created changes to both the working environment and working patters, enabling people to work flexibly across different locations, including at home and while travelling. It was against this background that, in September 2015, HMRC published a discussion paper that set out the case for changing the travel and subsistence (T&S) rules (not to be confused with employment intermediaries and tax relief for travel and subsistence) and a potential framework for new rules. However, the document did not include any firm proposals.

Issues with the current rules

Whilst the Office of Tax Simplification (OTS) found that the current system is reasonably well understood by employers and works well for the majority of employees, nevertheless there are occasions when, for a minority of employees, some rules are difficult to understand and operate, namely:

• a lack of understanding over the level of attendance that constitutes ‘regular attendance’ and how that test fits with the other rules;
• confusion around the definitions of permanent and temporary workplaces, particularly as these terms do not take their everyday meaning, making the distinction between them seem contrived and resulting in outcomes that look unfair to some workers (eg those employees who have a series of workplaces which most people would regard as being “temporary” under any ordinary use of the word);
• the fact that the ‘24 month rule’ relies on the employee’s intention rather than the amount of time actually spent at the location, making it difficult for an employer to judge when that employee’s intention changed;
• the fact that the current rules can mean that an employee ends up with more than one permanent workplace, even where their workplaces are a significant distance apart;
• confusion around whether or not a journey is ‘substantively the same’ as ordinary commuting or private travel; and
• confusion around homeworking, and whether or when a home to workplace travel is a workplace to workplace journey rather than ordinary commuting.

Proposed framework

Recommendations in the OTS’s second report on the review of employee benefits and expenses led to the development of the proposed framework that was presented in the discussion paper. At that stage the OTS affirmed that their overall objectives had been:

• to look for ways of modernising the systems and ensuring they are in tune with the employment patterns of today; the OTS also tried to think about emerging employment trends;
• to reduce administrative burdens all round: to streamline (or preferably eliminate) procedures that can be delivered more efficiently; and
• to increase certainty for employers in the rules and regulations that govern the Employee Benefits and Expenses system

HMRC have recently published the responses to the discussion paper and somewhat surprisingly the message that employers and representative bodies sent out was that, although complex in parts, the current T&S rules are generally well understood and work effectively for the majority of employers. Responses supported the principles underlying the taxation of T&S. Above all, responses highlighted the need for certainty and for this reason the government have decided to retain the current T & S rules. They do, however, want to make sure the rules work for modern practices and, where they learn of genuine difficulties in practice, they will continue to seek to improve employers’ reporting requirements for T&S.