Travelling to the workplace may now be unaffordable for some employees but employers who help by reimbursing travel expenses could be creating an extra tax burden for themselves and their employees.

The journey between an employee's home and their permanent workplace is treated as ordinary commuting and is not a tax-deductible expense. If the employer pays the employee a mileage rate or reimburses bus or train fares for ordinary commuting, that payment must be taxed as salary under PAYE.

A tax-free mileage allowance (up to 45p per mile) or reimbursed public transport costs can be paid where the employee travels to a temporary workplace. This is somewhere that the employee goes to perform a task of limited duration or for some other temporary purpose. For example a care worker visiting a client at their home will be travelling to a temporary workplace.

A workplace is always a permanent workplace if it cannot be shown to be a temporary workplace.

An employee can have two or more permanent workplaces, eg they may be based partly at their home and partly at the company's office. If the individual is required to attend the office for certain periods, say one day a week, the office is a permanent workplace as well as the employee's home.

Where the employment contract specifies that the individual is based at home but they are required to attend the office for specific meetings, the travel to the office for those meetings is tax-deductible and the employer can reimburse those travel costs to the employee.

Where the employee's normal place of work has changed (perhaps to their home) their employment contract needs to be updated with the location of the new permanent workplace and whether the employee now has two permanent workplaces.

We can help you ensure that any assistance given to your employees meets the tax legislation requirements.

Last updated: October 10th 2022.