HR and tax alert
October 2015
United Kingdom
UK Government consults on major reform of UK tax reliefs for
travel and subsistence expenses
Executive Summary
The UK Government continues to consider a major reform of
the existing tax rules on travel expenses, including travel
related subsistence such as the cost of meals and
accommodation on business journeys. This is part of its
ongoing tax simplification initiative which has already resulted
in significant changes in the taxation of share scheme income.
than two years, or the employee will perform less than 40% of
their duties there. If the intention changes so that the
timeframe will exceed two years, the relief ceases from the
time that the intention changed. The test has attracted
particular criticism in the past because it is intention based.
Following various consultation meetings last year, the
Government has now issued a further document containing a
number of proposed reforms.
Under the new proposals, relief will be for a set period (which is
yet to be determined), regardless of the intended duration of
the assignment. Given the proposals are required to be cost
neutral it is unlikely that this period will be longer than the
existing two years.
The main catalyst for change is a perceived confusion over the
reliefs currently available to employees assigned to a
temporary workplace. This affects globally as well as
domestically mobile employees. An overhaul of this law is
recommended in the document, but appears less restrictive
than many feared, given the stated need for any reform to be
tax neutral.
The concept of temporary and permanent workplaces is also
expected to be revised. The Government is consulting on
alternatives, but the current proposal is to introduce a “main
base” concept. Broadly, most employees will have one or more
main base workplaces where they spend more than a specified
percentage of their working time. Relief would be available for
travel to any workplace other than a main base.
Key issues
The existing regime for claiming tax relief on travel and
subsistence works well and could be seen as quite generous
when compared to the regimes in other countries. However, it
is complex and arguably inappropriate to 21st century working
patterns. In particular a recent review has highlighted
difficulties in deciding whether a workplace is a temporary or a
permanent one, a decision that lies at the very heart of the
current regime. Travel between home and a permanent
workplace is currently regarded as private travel and taxable if
reimbursed.
Other suggested changes include:
 Abolishing tax relief for daytime subsistence costs
(currently an employee working away from his permanent
workplace during the day may claim the cost of lunch as a
business expense), and
 Preventing relief for journeys that are similar to that
incurred getting from home to work travel, for example travel
to a training location elsewhere in the same city as the
workplace. The proposal is to introduce the idea of a “work
location” rather than a workplace, which would treat home to
work travel in the same location as the main base as an
ordinary commuting journey.
Relief is available for travel to a temporary workplace, but a
workplace is typically only regarded as temporary if the
duration of an employee’s time there is intended to be for less
Implications
At the moment the reform remains subject to consultation and
there is some way to go before the final proposals become clear, but the current
suggestions are likely to clarify when relief is available, without imposing major
restrictions on that relief. The idea of replacing a subjective intention based test with
one relying on a “main base” is attractive, but the devil will be in the detail, especially
as safeguards against abuse will have to be built in. The continuation of some form of
“detached duty relief” for those temporarily assigned from their main place of work is
very welcome, especially for employers who second employees internationally, but any
reduction in the current two year time limit could represent a significant cost.
The abolition of tax relief for daytime subsistence costs is less controversial, as the
concept of a typical employer providing subsistence through the day at subsidised
rates at the main place of work is outdated, but there may be additional implications,
depending on the detail. For example, many employers who do have subsidised
facilities will want the tax exemption for this benefit to continue and reform of daily
subsistence could be the first stage in a more significant review of this area.
Employers may also be concerned that it will be difficult to apply a work location rather
than a workplace test, especially where expense claims are processed by a service
centre that is geographically removed from the area and new processes may be needed
to manage this.
Next steps
Employers should consider the proposed changes and how they might impact existing
policies and processes, including any potential extra tax costs for employees assigned
to the UK. There is still an opportunity to influence the reform and to help in shaping
the final proposals - please contact one of the team below, or your usual EY contact, if
you want to discuss the impact the proposals could have on your business or ways in
which you can help to shape them.
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Tel:
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EYG no. DN0896
Nigel Duffey
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Sue Robinson
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John Chaplin
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This material has been prepared for general
informational purposes only and is not intended
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Financial Services
Nick Yassukovich
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Steve Wade
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Sam Moore
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HR and tax alert