Most employees can identify their permanent place of work because it is where they regularly go to work. However, post-Covid, many workers work primarily from home, splitting their time between home and office. With more employees having the legal right to request flexible working arrangements, tax issues may arise concerning the reimbursement of travel expenses.

Particular areas of concern include:

· expenses relating to temporary workplace arrangements;

· ascertaining whether travel can be claimed between two workplaces; and

· understanding the definition of 'ordinary commuting’, for which no tax deduction is available.

Temporary workplace

HMRC permits travel expenses to be tax deductible should the employee be required to work from a 'temporary workplace'. HMRC defines a 'temporary workplace' as a location where 'an employee attends for the purpose of performing a task of limited duration or for some other temporary purpose'. HMRC looks for irregularity and limited time, e.g., if an employee based in Birmingham is required to work in London for a year, the London location would qualify as a 'temporary workplace' under these rules, making all travel expenses tax deductible.

However, there is a further rule preventing a workplace from being a temporary workplace where an employee attends for a period of continuous work that lasts, or is likely to last, more than 24 months (the '24-month rule'). 'Continuous work' is defined by section 339(6) ITEPA 2003 as a period during which the duties of the employment are performed to a significant extent at that place. HMRC views 'significant' as when the employee spends or is expected to spend 40% or more of their working time at that particular workplace. In such cases, the workplace is classified as permanent, and travel between that location and home would be regarded as ordinary commuting, making it non-tax deductible.

Should it be known from the outset that a contract at an alternative location will last at least 24 months, travel expenses cannot be claimed from the start. However, if the duration of the contract is uncertain, tax relief can be claimed if it is assumed that the agreement to work at the temporary location will not extend beyond 24 months.

Expectation

Complications can arise when expectations change. In the Employment Income Manual, HMRC gives an example of an employee who has worked for their employer for ten years and was sent to perform full-time duties at a workplace for 28 months. In this case, the workplace is deemed permanent because the attendance is continuous, and it is initially expected to exceed 24 months. As a result, the 24-month rule means that no travel expenses can be claimed as tax deductible.

However, if after ten months the assignment is reduced to 18 months, employees cannot claim deductions for travel costs during the first ten months, but can claim for the final eight months. Due to the initial expectation that the assignment would meet the 40/24 test, the workplace is considered permanent for the first ten months, becoming a temporary workplace afterwards, even if the actual duration turns out to be different.