Tax relief for employee travel where there is “hybrid” working

During the COVID-19 pandemic many employees were required to work from home.  Since restrictions have been lifted, employers have put in place “hybrid” working arrangements whereby employees work from home on certain days and in the office for other days. Some of these arrangements are contractual and others are arranged on a voluntary basis.

HMRC have recently updated their internal guidance in their Employment Income Manual to deal with situations where employees are travelling between home and their office which, in most cases, will continue to be treated as ordinary commuting and not an allowable business journey. The exception is where home is their workplace and the place where the employee lives is dictated by the requirements of the job.

Note that HMRC Guide 490 for employers has yet to be updated.

The legislation in section 337 ITEPA 2003 permits relief for travelling expenses necessarily incurred in travelling in the performance of the duties of the employment. Subject to certain conditions, travel may be considered to be in the performance of the duties of the employment, where:

• travel is between workplaces,
• travel is between home and work, where home is the workplace and the place where the employee lives is dictated by the requirements of the job, or
• a travelling appointment is held.

Section 338 ITEPA 2003 permits relief for the cost of travel for necessary attendance at any place in the performance of the duties of the employment. Travel for necessary attendance includes journeys that employees make to or from a place they must attend in the performance of their duties, but not journeys that are ordinary commuting or private travel.

New HMRC example of hybrid working:

An employee works in his employer’s office for 4 days every week, but the requirements of the job dictate that he must work at home every Friday. It is accepted that his home is a workplace on Friday.

His travel from home to his employer’s office on Monday to Thursday is ordinary commuting because those premises are a permanent workplace.  His travel costs on those days are not deductible.

If he is unexpectedly required to visit the employer’s premises on Friday to carry out the duties of his employment, his travel costs are deductible under Section 337 ITEPA 2003. On that day he is travelling between two workplaces.

Contrast with the following HMRC example:

Elliot’s employer has decided to offer its employees a hybrid way of working which allows a mixture of working at home and working in the Bristol office. This flexible way of working is offered on a voluntary basis.

Elliot decides to split his time between working at home and in the Bristol office. Tax relief is not available for journeys between home and the office because the office remains a permanent workplace.

Elliot using his home as his workplace does not override the fact that it is his home and travel to a permanent workplace from home is ordinary commuting.

See: HMRC updated guidance - (https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim32170)