Travelling Man: Income Tax Relief & Temporary Workplaces
The case of Sambhi v HMRC (2020) provides a useful reminder of the “temporary workplace” rules for the purposes of income tax relief on travel and subsistence costs. In this case, the First Tier Tribunal (“FTT”) dismissed the taxpayer’s appeal and held that a change in the average travel time of 30 minutes or in travelling expenses of £14 were not “substantial” enough to qualify for relief.
Temporary Workplace: An Introduction
The cost of commuting from home to your workplace is not deductible as an expense against your employment income. This is because it is not a cost wholly, exclusively, and necessarily incurred in the performance of your employment; rather it is a cost incurred to put you in the position of being able to perform your duties of employment.
However, where you incur travel and subsistence costs in relation to travel to a “temporary workplace” and these costs are reimbursed by your employer, then relief may be available. A workplace will be a “temporary workplace” for tax purposes if you go there to perform a task of limited duration or for a temporary purpose.
However, a workplace will be treated as a permanent workplace (and therefore relief will be denied) where:
- there is a period of continuous work that lasts, or is likely to last, for more than 24 months*; OR
- the period is less than 24 months, but attendance there comprises all (or almost all) the period for which you hold (or are likely to hold) the employment.
*there will be a “period of continuous work” where you spend 40% or more of your working time at that workplace. Where attendance at a workplace accounts for 40% or less of your working time on average, then the workplace will always be considered a temporary workplace, regardless of the length of the employment/contract.
Furthermore, if the modification of the place at which the duties are performed does not have any substantial effect on your journey or expenses of travelling, then relief will be denied.
Sambhi v HMRC (2020)
In the recent case of Sambhi v HMRC (2020), it was agreed by both parties that the taxpayer’s workplaces (in this case construction sites) constituted temporary workplaces. The question the FTT were asked to consider was whether the change from one project to the next had a substantial impact on his journey and/or expenses.
- Sambhi worked for a construction company, and under the terms of his employment contract was required to live and work away from home where travel to projects necessitated it.
- The taxpayer’s home was in Birmingham, so when his work took him to Greater London he lived in temporary accommodation during the week.
- He worked at various sites in Greater London in the period between 2013 and 2019 (i.e. 6 years).
- Travel and subsistence costs were reimbursed by his employer, who deducted PAYE and national insurance from these payments.
- Sambhi made claims in his self-assessment tax returns for relief in respect of payments for travel and subsistence allowances paid by his employer.
As noted above, the only issue in dispute was regarding his transfer from one project to the next and whether this had a substantial impact on his journey.
HMRC submitted that there was no substantial effect on Sambhi’s journey when he transferred to a new project when considering the journey from his permanent home in Birmingham to the relevant construction sites. In consequence of this, all the sites in Greater London are treated as a single workplace, and the 24-month rule would then apply to deny the relief.
Sambhi disagreed with HMRC’s position on four points:
- As he travelled from his home to the temporary accommodation each week, and then from the temporary accommodation to the relevant construction site, the “journey” to be analysed is the journey from the temporary accommodation to the site – not the hypothetical trip from Birmingham to the site as argued by HMRC.
- The changes in the locations were substantial. Substantial is not defined in the legislation, and in this context should mean material.
- HMRC’s guidance states that construction sites are considered temporary workplaces if the taxpayer’s attendance at that site is not expected to last longer than 24 months, and provides an example where (by chance) the journey time and cost remains roughly the same.
- The implication of HMRC’s submissions is that much of Greater London is a “geographical area”. The temporary workplace rules requires that the contractual duties are defined by reference to an area which was not the case in this instance.
In reaching a decision, the FTT considered the journeys from Sambhi’s home in Birmingham to the various construction sites, via the temporary accommodation, and averaged them over the week. Maps were produced in evidence showing these locations, as were tables of the distance in miles of one project from the previous project, the distance from Sambhi’s temporary accommodation at the time to the site, and the commuting time. In doing this, they identified that Sambhi’s travel costs differed by no more than £14 on changing from one project to another, and the greatest change in the one-way trip time was just over half an hour.
The FTT held that for something to have a “substantial effect”, the effect must be sizeable, and they did not consider these changes to be sizeable in this case.
In light of this, the appeal was dismissed.