HMRC review of tax rules on travel and subsistence

On 23 September 2015, HMRC published a discussion paper on the reform of the tax rules for travel and subsistence. This follows the consultation which was launched in July 2014 and which is intended to review the tax treatment of employee benefits in kind and expenses.

Under the current proposals, tax relief would be available for:

• Journeys made in the performance of the employee’s duties. This merely restates the current position and does not amount to a change.
• Journeys that constitute a necessary part of an employee’s job, where the location is not the employee’s "main base". This is a significant change. The proposal is that an employee would be able to select their “main base” from any location at which the employee spends a reasonable proportion of their time (currently proposed to be at least 30%). The employee would then be able to claim relief on all travel costs to and from any base other than their “main base”. Employees who do not have a main base would be able to claim tax relief on all necessary travel for work, including home-to-work travel. This will be a beneficial change for employees who are based at different locations.
• Journeys to an employee’s "main base" where all of the employee’s bases are "detached duty" locations. The proposals seek to avoid the “temporary purpose” definition to simplify the situation for workers who spend a period of time working at a temporary location, such as a client site. The intention is to set a period for claiming relief from a temporary location, which is currently proposed as 24 months.

Employees who are required to be based from home will be eligible for relief on their travel costs.

The Government is looking to scrap day subsistence, which could impact on many National Insurance Contributions savings schemes implemented by employers in the construction and transport industries in particular. Employers who operate such schemes are recommended to take specific advice.