Knowing when you can claim expenses or tax relief for driving on business is obviously good for your bank balance. But at the same time, getting mileage wrong can be really expensive – firms have been hit with six or seven-figure fines and back taxes after mix-ups over private and business fuel payments to employees.
In these days of short-term contracts and working from home – or wherever there’s a wi-fi signal – it’s getting harder to be sure whether mileage is claimable or not.
TMC have put together this short guide, which they’ve enabled us to share with our members, on when employees generally can or can’t claim expenses or tax relief.
This is a quick overview of the basic principles. It’s not intended as legal or tax advice so, it’s always best to seek legal or tax advice where there are grey areas.
What makes a mile a business mile?
A business mile is one travelled ‘in the performance of your duties’. It’s when you’re driving ‘on the job’ as opposed to driving ‘to the job’. You’re not allowed to claim for any private travel or for most commuting journeys. You can, however, claim for travelling to places where ‘attendance is in the performance of your duties’, such as between your permanent workplace and a satellite office or, in some circumstances, between home and a temporary workplace.
Which brings us to…
Ordinary commuting is off limits for mileage claims
For most employees, ordinary commuting is the journey an employee makes most days between their home and permanent workplace.
Contracts of employment must state the location or locations (i.e. addresses) where employees are normally expected to work. This obviously has a are significant bearing on whether your travel between your work location(s) and home counts as ‘ordinary commuting’, although the tax office generally look at the issue in terms of what counts as your ‘regular’ place of work.
By ‘regular’ they mean your attendance for work is frequent, it follows a pattern, and is consistent for all, or almost all, of the period for which you hold that employment. For instance, if you work in your company’s office if three days a week and routinely work at a customer’s premises on the other two, your mileage from home to both places counts as ordinary commuting and so isn’t claimable. If you start work at the same place every day, it’s a regular workplace. The HMRC test here tends to be if the employee spends 40 per cent or more of their working time at that place, then it is the regular place of work irrespective of the office address on the employee’s contract of employment.
It is also important to point out that you can’t turn ordinary commuting, or private mileage, into business mileage simply by doing a bit of work along the way or during the journey, such as stopping to make a phone call or as dropping something off on route.
But you CAN claim for commuting when your workplace is temporary, or you don’t have a ‘regular’ workplace in some instances.
Some people don’t have a permanent workplace. They might work on projects at different locations for months at a time. Or they might be field-based with no set pattern of visits around their territory. This can get their confusing but HMRC has rules for both situations.
The cost of travel to a temporary workplace can generally be claimed as business mileage and qualifies for tax relief. A temporary workplace is somewhere other than the ‘regular workplace’, where an employee goes ‘to perform a task of limited duration or for a temporary purpose, even where they attend it regularly’.
But there is a further rule that prevents a workplace from being a temporary workplace; where an employee attends it in the course of a period of where continuous work that lasts, or is likely to last, more than 24 months. If the assignment lasts longer, or the role is transferred there permanently, getting to and from work goes back to being ordinary commuting. Of course, to qualify for this rule you have to be in a permanent job that would normally be based somewhere other than the temporary workplace.
If an employee worked one day out of five at a customer’s office for more than 24 months, this would still be classed as a temporary workplace as it takes up less than 40% of their working time.
There are exceptions though and a common sense approach is required. HMRC state that where the journey to a temporary workplace is not where significantly different to the employee’s ordinary commuting journey, no mileage claim/tax deduction is allowed for the journey.
HMRC devotes several pages of its guidance to situations where employees don’t have a single permanent workplace. Here, the permutations of what might and what might not be business mileage really start to multiply.
If, say, your job covers Lancashire and you live in Cumbria, you cannot claim for the cost of reaching the edge of your territory from your home (this is classed as ordinary commuting).
But you can claim for all miles driven on your territory, as well as miles to any other workplaces you’re required to attend outside it.
What if you are, say, an estate agent who works out of five offices in a 20-mile radius of home?
As far as driving between your home and each office goes, you can’t claim mileage because each office counts as a permanent workplace under the rules. Travelling between the offices counts as business mileage though, as do any trips to properties you are selling as you are driving in the performance of duties.
Business Mileage and working from home
If your employer allows or expects you to work from home some or all of the time, do trips to the company premises then count as commuting or business mileage?
HMRC state the following criteria has to be met for your home to be considered your workplace:
- The duties that the employee performs at home are substantive and represent all or part of the central duties of the employment
- Those duties cannot be performed without the use of appropriate facilities
- No such appropriate facilities are available to the employee on the employer’s premises (or the nature of the job requires the employee to live so far from the employer’s premises that it is unreasonable to expect him or her to travel to those premises on a daily basis)
- At no time either before or after the employment contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere.
If HMRC agree that home is your place of work, for all, or part of your working week, you may be able to claim business mileage/tax relief when travelling to your place of work. The journeys you can claim are dependent on your regular working patterns. For instance, if an employee works from home Monday – Thursday and works from the office on Friday, their trip to the office on Friday is an ordinary commute, but if you went into the office for a client meeting on one of your home working days, that would count as ‘travelling in performance of your duties’, for a temporary purpose, and for a would be claimable.
Passing work on the way to somewhere else
Sometimes the route of a business journey takes you past your workplace. Does the part between home and you workplace count as commuting or business mileage? The answer comes down to whether you stop at the office and for how long. If you drive past the office without stopping, the whole journey counts as business miles. If you drop into the office very briefly on the way, say to pick up some papers you need for the meeting, you can still claim for the leg between home and work. But if you carry out ‘substantive work’ while you’re at the office – e.g. you attend a meeting – then the leg between home and work becomes ordinary commuting and you can’t claim f for it.
Rule One of business mileage: keep a complete record
Of the almost limitless range of circumstances the rules must cover, HMRC say: ‘We recognise that there will be cases where the position is not clear cut’. However, should anyone take this as a cue to try to game the system, they add: ‘Employers and employees should be aware that it is a serious offence to make a false statement or claim to us. … Where that has happened, we
will consider the scope of taking action against employers to recover PAYE or, if appropriate, recovering tax, interest and penalties from the employee.’
Whether you are an employer or an employee, Rule One of business mileage is keep a full record of every journey you know or believe qualifies as record business travel. That should include date, reason for travel, start and finish address or postcode and mileage. Keep a note of any special circumstances, such as unexpected diversions or detours. This isn’t just important for
prompt settlement of fuel and mileage expenses, it’s invaluable for demonstrating compliance with the rules.
And if you are a driver who receives less than the full tax free mileage rates set by HMRC (AMAP rates) for using your own car, you’ll also need a rates) complete mileage log to claim tax relief on the unpaid element of the unpaid available AMAPs at the end of the tax year. This is performed by either
self-assessment or claiming to the HMRC via a P87 form at the end of each tax year.
TMC’s easy to use, award winning, Mileage Capture and Audit service will ensure you are fully compliant on this topic and are well prepared for a HMRC audit. TMC can also help you and your employees with any tax relief claim on the unpaid element of AMAPs. Find out more on their website. Statistically, only 40% of employees are aware of the tax relief!
The above is a very high level skim across the rules. You can find more information on HMRC’s website – EIM32000 – Employment Income Manual – HMRC internal manual – GOV.UK (www.gov.uk)