The rules that currently govern tax relief for employee business journeys were last updated in 1998 and since then developments in technology have promoted changes in both the working environment and working patterns. People are now able to work more flexibly across a variety of locations including at home and even whilst travelling. It was in response to these changes that in September 2015 the HMRC published a discussion paper setting out the case for changing Travel and Subsistence (T & S) rules and introducing a framework for new regulations. It should be noted that this should not be confused with employment intermediaries and tax relief for travel and subsistence, an area in which the government is abolishing tax relief from home to work travel for certain contractors come April 6th 2016
Problems with the current rules
One might be prompted to ask what exactly are the problems with the current rules? In fact, the Office of Tax Simplification (OTS) has found that the current system is reasonably well understood by both employer and employees. However, there are still occasions when, for a minority of employees, some of the rules have been difficult to understand and operate. These are surmised below:
what exactly ‘regular attendance’ constitutes
confusion as to how ‘temporary’ and ‘permanent’ workplaces are defined in the realms of the legislation, particularly where an employee can end up with two permanent workplaces often some distance apart.
Uncertainty regarding whether a journey falls into the category as being ‘substantively the same’ as ordinary commuting or private travel.
When working from home whether traveling to a workplace falls into the category of workplace to workplace travel or just ordinary commuting
A second report by the OTS has led to a proposed framework then presented in a discussion paper with overall objectives, aside from reducing the administrative burden all round, being affirmed as:
Ensuring systems are in tune with modern employment patterns and conscious of emerging employment trends.
Increasing certainty for employers with regards to the rules governing Employee Benefits and Expenses.
Interestingly HMRC have recently published responses to the discussion paper which, for the most part, show the T & S rules to be well understood and working effectively for the majority of employers. More than anything responses underscored the need for certainty and as such the government has decided it is best to keep all T & S rules in their current form. However, when they learn about difficulties in practice the government will continue to seek to improve employers’ reporting requirements for T & S.