HMRC updates WFH commuting guidance

Employees are pushing for coverage of their commuting expenses as employers push for office working. In this article, Zyla Accountants explores HMRC's updated guidelines for reimbursing travel costs for hybrid workers.

There were fewer permanent changes in daily life after the pandemic than many had predicted.

One trend that has stuck, at least in part, is the rise of home or hybrid work.

An interesting debate took place at the Festival of Accounting and Bookkeeping between Emma Rawson, representing the Association of Taxation Technicians, and Paul Aplin, the newly appointed vice president of the Chartered Institute of Taxation. Despite the obvious exclusions for job roles where this cannot be done, the benefits of WFH were undeniable enough to lead Aplin to jump ship almost immediately.

Candidates are increasingly informing recruiters that flexible or hybrid working is a non-negotiable with 100% office-based roles being rejected.

Millions of people across the UK (England, Scotland and Wales) will now be able to request flexible working arrangements that fit their other commitments and needs after the Flexible Working Bill gained royal assent in July 2023.

It has been reported that some employers are asking their employees to cover commuting costs on days they return to work at least some of the time. Individual businesses or employers must make this decision based on many factors, not least the tax implications.

Commuting costs

Travel expenses per HMRC's guidance can include:

• public transport costs;

• hotel accommodation if you have to stay overnight;

• food and drink;

• congestion charges and tolls;

• parking fees; and

• business phone calls and printing costs.

No matter what the business decides, HMRC's position remains unchanged. To avoid confusion, they have updated their guidance: Ordinary commuting and private travel (490: Chapter 3) with a new section added at 3.39 to clarify the tax position on any potential reimbursement of such costs for hybrid workers.

Income Tax (Earnings and Pensions) Act 2003 allows deductions for travel expenses from taxable earnings in the following circumstances:

• the employee is obliged to incur and pay them as holder of the employment; and

• the expenses are attributable to the employee’s necessary attendance at any place in the performance of the duties of the employment.

However, this does not apply where the expenses are incurred in ordinary commuting, defined as:

• the employee’s home and a permanent workplace, or

• a place that is not a workplace and a permanent workplace.

Home is where the work is

The introduction of a hybrid working arrangement may result in a change to the employee's permanent workplace for tax purposes. It is unlikely, however, that employees will switch their permanent workplace from the office to their homes where they still spend some days in the office.

On office days, commuter travel will still be considered commuting and all reimbursed costs will be subject to tax and national insurance.

A new example has been added to section 3.39 of the HMRC website to clarify this position:

Example 42 — employees who work at home

“Elliot’s employer has decided to offer hybrid working to its employees. This allows employees to mix working at home with working in the Bristol office. This flexible way of working is voluntary for Elliot, so he is not required to work from home as part of his role.

“Elliot decides to split his time between working at home and in the Bristol office. Elliot’s office will remain his permanent workplace when he begins to work in a hybrid way. This means Elliot cannot claim tax relief on journeys made from his home to the office because such journeys are ordinary commuting.”

Blurred lines

Where there is no longer an office to travel to, or the employee is 100% home based, the home may be treated as the permanent workplace. This blurring of the boundaries between work and home does not change the rules on tax relief for non-work purposes. For the avoidance of doubt, the guidance clarifies this at 3.40:

“An employee is not entitled to tax relief for journeys between their home and any other place attended for reasons other than work, even when home is a workplace. Such travel is private travel.

“Tax relief will of course be allowed for the costs incurred on travelling between the employee’s home and a temporary workplace.”

On Gov.uk, you can find more information on claiming expenses for employees who work from home all or part time.