People who work from home say their commuting costs should be treated as a tax-deductible expense if employers want them to come to the office. That’s the main finding of a new survey by the Office for Tax Simplification, the government’s independent tax advisor, which we covered last week with the help of tax specialist Chris Thomas.

The Telegraph headline is ‘I’m going to the office… but only if you pay me’ and Chris pointed out that employers increasingly want their staff to come to the office and why some employees, especially those with long commute, they may find their employer’s offer to pay their travel costs attractive.

It begs the question: If employees who work in hybrids split their time between home and office, are they entitled to claim travel expenses for the days they travel on those office days? We know that business travel can be reimbursed tax-free, but does it count as business travel or not? Everything revolves around a central question posed by the tax law, which is: what is the permanent workplace of the worker? So, has the move to a hybrid work arrangement, shifting the employee’s permanent location from the employer’s office to the individual’s home, changed the situation? Not understanding that point is putting many employers in trouble, facing costs they didn’t appreciate. So let’s look at this issue and what employers need to consider when implementing their hybrid work policies. Chris met with me on the phone from the Birmingham office to discuss it:

Chris Thomas: “Obviously, we all know that the world of work and especially where work is done has been very affected, very changeable, due to the pandemic and also likely to look substantially different in the future. historically with the introduction of new hybrid work arrangements and so on. Now a lot of companies will obviously still work out the details of how this will work in practice and the implications of this on a number of different levels, but one of the considerations to think about when having those discussions is how to deal with travel expenses. that the employee might incur when moving between the different places where they are working, such as their home, the main office or the places where they might be working. Now, that’s always been a bit of a tricky area with quite a few different permutations depending on the particulars of the arrangements in any given case but, on the other hand, really, for a lot of employees who were only working five days a week in the office, it was reasonably straightforward because your commute from home to work was exactly that, and no one expected the travel costs for which we are going to be reimbursed. Yes, if they went to work somewhere else, it would be, but overall, it was pretty clear. I think, unfortunately, in the future, it’s probably going to be a little less clear and that’s why this is something that employers should be thinking about now, to understand what they can and can’t do and how they present it to employers. employees in terms of managing their expectations.”

Joe Glavina: “So what does the tax law say about that, Chris?”

Chris Thomas: “The basic principle for tax purposes is that if you travel to a place that is a permanent place of employment, then generally speaking, if your expenses are reimbursed for that, it’s probably tax deductible, so it would be a benefit in type, whereas if you go somewhere classified as a temporary workplace, then generally speaking those expenses, if reimbursed to you, would not be taxable. That sounds reasonably straightforward, but unfortunately it’s not so easy in practice because the question that arises is, well, what really is a permanent workplace? What is your main place of work? Is that still what used to be the place you went to for the office five days a week? It is your house? Is it somewhere else? do you have at least one? These are all questions that will vary, the answers will vary, depending on the particular case. But certainly we’re seeing from a number of clients that there’s a lot of demand for employees to be classified as home based on home based contracts and there may be a number of reasons for that, but one of them I think is the hope or expectation that by doing so, it entitles them to claim travel expenses when they travel anywhere else, including what might have previously been their main office. Now, obviously, there’s a business decision for the company as to whether or not to do it in light of the ‘war for talent’ and all these considerations, but I think it’s important when they’re forming a policy around it. understanding the parameters from a tax perspective as to when I would actually be tax free or not because unfortunately it’s not as simple as the average employee might think, in that, oh well, you know, I work from home three days a week, so my home is my main place of employment and anywhere else I go could be tax free. It’s not that simple because the office could still be your permanent workplace, even if you don’t go there that often. HMRC has particular views on when your home can be classified as a permanent workplace so you might actually get tax relief if you go somewhere else that is a permanent workplace. There will be categories of employees who, perhaps more broadly, given the nature of their roles or arrangements, are changing in such a way that they are going elsewhere and the question is how are they going to be treated? So I think it would warrant a broader review, really, of the whole way the company deals with travel expenses and, as I say, understanding what you can and can’t do and factor that into the policies that are being developing and the expectations that employees may be forming so that they can be properly managed”.

That OTS report on distance and hybrid learning was released on December 20 and makes for interesting reading, perhaps paving the way for future tax law changes in this area. We have put a link in the transcript of this show.

– Link to the OTS report on hybrid and remote work