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At Budget 2014, the Government announced that it intended to review the rules underlying the taxation of travel and subsistence expenses. The Office of Tax Simplification (OTS) had been reviewing the benefits and expenses system and their second report was published on 29 January 2014. It contained a number of recommendations in respect of ‘HMRC Administration’ and ‘Travel and Subsistence’ with the aim of simplifying the benefits and expenses procedure and legislation.
In a letter to the OTS from David Gauke, published after the Budget Statement, the Exchequer Secretary to the Treasury outlined its response to the recommendations that were made in respect of travel and subsistence:
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OTS Recommendation |
Government Response |
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Legislation stating an employee can have only one permanent workplace, being the place where they spend the greatest part of their working time. However, if costings show that this route would be too expensive for the Exchequer, we recommend amending Section 339 ITEPA 2003 to redefine “permanent” and “temporary” workplace by introducing a statutory percentage test, probably at 30% |
The Government will undertake a review of the principles and rules underlying the tax treatment of travel and subsistence expenses. The review will consider how the tax treatment of these expenses can be simplified best address the challenges of the changes to modern working and travel patterns.
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A deduction for travel and subsistence expenses associated with a temporary workplace for the first 24 months regardless of the intended length of an assignment |
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A specific code for homeworkers with one clear definition of homeworking for all tax purposes |
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Remove facility for employees to claim the cost of expenses not reimbursed by employers in working from home, provide an uplifted homeworking allowance, e.g. £10 per week |
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A section added to ITEPA 2003 referring to ‘accommodation and subsistence expenses |
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In relation to benchmark scale rates, the guidance around ongoing checks should be amended to remove the requirement for employers to retain receipts |
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Consideration is given to an exercise to modernise the rules for workplace lunches and canteens to improve consistency |
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Where a deduction is available for attendance at a temporary workplace, living accommodation should be included in a P11D dispensation whether provided through hotel accommodation or use of a company flat (or equivalent) |
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A formal, comprehensive study on the radical idea of all travel and subsistence expenses (possibly not including ordinary commuting), being allowable only if reimbursed by employer |
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A formal review of tax reliefs for travel and subsistence should take place every ten years to make sure the system fully recognises changing work patterns |
This review is taking a two stage approach:
Stage 1
Between July and October 2014 (launched 31 July), the Government discussed the current framework plus any future framework that should exist in respect of the reimbursement of travel and subsistence expenses. Stage 1 did not consider specific details; merely understand the type of payments that should qualify for tax relief.
This Stage is closed and the Government is ‘considering the findings’.
Stage 2
From winter 2014 to spring 2015, the Government will establish a working group. This will assist in establishing and producing ‘a new set of principles upon which the rules of a new travel and subsistence tax regime’ will be based. These principles will be based upon the findings of Stage 1.
A report on the Stage 2 review will be published by Government at Budget 2015.
| Image may be NSFW. Clik here to view.  Comment
A long overdue review and we hope that this leads to some legislation and guidance that is suitable for the workforce in 21st century UK. The only note of caution is that no reform is guaranteed with the statement: ‘Should the government decide to proceed with reforming the rules, any proposals will undergo a full consultation so that any interested parties can contribute their views for consideration.’ Plus, nothing will happen under the current Coalition Government. |
Further Information
- Gov.UK – Review of Employee Benefits and Expenses: Second Report (Office of Tax Simplification)
- Gov.UK – Travel and Subsistence Review
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