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.
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:
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:
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.