Hybrid working – what counts as a business journey for tax purposes?

HM Revenue and Customs (HMRC) have updated their guidance on what qualifies as ordinary commuting and private travel for tax purposes to include hybrid or flexible working.

Generally, where an employee works at home as an objective requirement of the job, then HMRC will usually accept that the employee is entitled to tax relief for the expenses of travelling from their home to another workplace, such as the office, when this is in performance of the duties of their job.

Usually, HMRC will only accept that working at home is an objective requirement of the job if facilities that an employee needs to do their job are only practically available at their home.

On the other hand, if an employer provides appropriate facilities in other locations that could be practically used by the employee, or the employee chooses to work from home, then HMRC will not accept that working from home is an objective requirement of the job.

HMRC provide an example to illustrate this. The work of an area sales manager living in Glasgow requires her to manage the company’s regional sales team across Scotland, but the companies nearest office is in Newcastle. Since the manager cannot practically attend that office and is required by her employer to keep all client information securely at home, she is entitled to tax relief for her costs on the occasions she travels to the company’s office in Newcastle.

Since COVID and with the developments in communication technology, many employers now allow their employees the choice of working from home on a flexible or hybrid basis. The employee will usually have a base office that they attend on the days they are working in the office.

Since this flexible way of working is voluntary for the employee, they are not required to work from home. This means that any journeys they make from home to the office are ordinary commuting and do not qualify for tax relief.

This is important to be aware of as an employer if you reimburse staff using the approved mileage rates. You must make sure that you do not reimburse expense claims for home to office travel for employees who are hybrid workers by their own choice. If you do, the payment then becomes a benefit and will need to have tax and national insurance deducted via payroll.

If you are not sure about whether you or an employee qualifies for tax relief on home to office journeys, please feel free to call us at any time. We will be happy to help you!

See: https://www.gov.uk/guidance/ordinary-commuting-and-private-travel-490-chapter-3#employees-who-work-at-home