Are travel expenses taxable or tax deductible?
The HMRC definition of “travel expenses” includes the actual costs of travel together with any subsistence expenditure and associated costs incurred in making the journey. Tax relief is available in most cases for the full costs of business travel, although specific rules do apply to employees using their own vehicles for business purposes.
What travel cannot be claimed against tax?
Business travel expenses are incurred when an employee or a self-employed worker has to make a journey in order to or from a place they have to attend in order to perform their duties. Normal commuting from home to the workplace and travel for personal reasons are not tax-deductible.
One distinction that is often made is between travel “on the job” and travel “to the job”.
Examples of travel payments which are tax-deductible are travelling to meet clients, meet suppliers, attend a conference, participate in a meeting, or visit other offices or branches.
Only travel that is “wholly and exclusively” conducted for business purposes can be considered tax-deductible. Travel for personal reasons or between the home and the usual workplace cannot be claimed. Adding sightseeing to the end of an otherwise exclusively business trip would render the entire trip non-tax-deductible. Similarly, an employer cannot ask an employee to stop off during their usual commute in order to pop into an office en route or make business phone calls during the commute.
Another exemption is that any expenses paid to applicants who attend the workplace for the purposes of a job interview are not considered to be business expenses. This is because HMRC does not consider job applicants to be “employees” and as such their expenses are not covered.
What if I work from home?
What happens if your workplace (or one of your workplaces) is your personal home? Travel expenses from home to a permanent workplace only qualify for tax relief if the journey can be defined as necessary to perform the duties of the job. This is because the location of the employee’s home is usually down to personal choice and is not an objective requirement of the job. Tax relief can be claimed, however, when an employee works from home and has to travel to a temporary workplace, such as another office.
Travel expenses and VAT
If you are VAT registered, you can usually claim back VAT on your travel expenses. As before, there are specific rules as to when VAT on travel can be reclaimed. First of all, travel must be exclusively for business purposes.
Secondly, only VAT on travel by certain forms of transport can be claimed back. This is because train tickets and airfares are what is known as “zero-rated”, so VAT is not charged. You cannot, therefore, claim back any VAT on your travel expenses if you use a train or plane. You can, however, claim back VAT on mileage and on taxi fares.
Similarly, you can claim back VAT on payments you make for meals and accommodation, if they are incurred as part of a business trip and are considered to be reasonable.
How much can be claimed?
The amount you can claim depends on several factors, including the method of transport, the length of the journey, and any overnight costs. If you are using your own vehicle or a rented vehicle, you can claim the actual costs of fuel and a proportionate amount to cover any maintenance, tax, insurance, and repair costs incurred during business travel. Alternatively, you can make a standard rate claim of 45p per mile for the first 10,00 business miles and 25p per business mile after that point.
If your employer pays you travel expenses of 35p per mile, you may only claim the difference between this amount and the HMRC rate of 45p per mile - in this case, 10p per mile.
Remember that the usual costs of travel from your home to your permanent workplace are not covered under any circumstances.
Keeping track of your expenses
In order to submit a claim for tax relief on your travel expenses, you need to keep comprehensive, accurate records of your journeys and your expenditure. Keep track of the details of your journeys – the locations you visited, the start and end points, the reason for the journey and the date it took place. You should also keep all receipts for accommodation and food and drink expenses. If you are employed, you should keep copies of your pay slips, which will show any business mileage or per diem costs paid by your employer.
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