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When it comes to claiming business travel expenses, it really is all about the journey.
Once a trip is classed as a business journey, all the other travel expenses such as subsistence or motor costs can follow from there.
But this isn’t always straightforward. Whether something counts as a business journey depends on your particular circumstances and how you operate.
There are also some differences between sole traders / partnerships and limited companies. But before we get into the differences, let’s look at the key rules that are the same for all businesses.
The first important rule is that travel between home and work (your normal commute) is not allowed.
There are some differences as to how the workplace is defined, but the common factor remains that journeys between home and work are not classed as business travel. Therefore no associated expenses can be claimed.
The other important thing to remember is that for business expenses, the trade purpose must be the only purpose. This applies to all types of business.
So if there is a dual purpose to a journey (business and private), then the whole journey and all associated expenses could be disallowed. As ever are some exceptions and complexities, but as general advice it’s much better to avoid making dual purpose journeys if you can.
There are different sets of legislation and rules between sole traders / partnerships and limited companies which are similar, but not exactly the same.
The main reason for the difference is that directors of limited companies are considered employees of the company, so what they can claim for travel is covered by the rules around employee expenses along with any other employees.
A sole trader (or partner) is not an employee, so what they can claim is covered by a different set of rules. If the business has employees then the employees will be covered by the employee expense rules, but the sole traders or partners themselves won’t as they are not employees.
The main differences relate to how the workplace is defined.
The workplace for sole traders or partnerships is defined by the base of operations.
The workplace doesn’t have to be a building, office or shop that you own or rent. It can be anywhere that you regularly carry out your trade. So for a personal trainer, this could be the local gym.
Base of operations really depends on how you run your specific business. You need to think about your particular circumstances. Some areas to consider are:
Once you’ve established your base of operations then you should not claim any expenses for journeys made between home and that location. These journeys are classed as your normal commute.
This seems simple enough if you operate from a shop or an office, but what about other businesses that operate from home or don’t have a specific workplace?
Some traders are “itinerant”, meaning they don’t operate from a specific location. For example, a builder who travels to wherever the job is located and operates the business from their home. Admin such as bookkeeping and invoicing is done at home, tools are kept at home and the home address is used for the business correspondence. In this case the base of operations will be home and travel from home to the various jobs can be counted as a business journey.
Working from home sometimes doesn’t automatically make it your base of operations. If you sometimes or partly work elsewhere then this could well be counted as your base of operations rather than home. Particularly if it’s a regular location and / or the trips are predictable. This could include a location where equipment is stored or if you visit a depot to pick up items before starting work. The more regular and predictable the journey between home to a work location, the more likely it could be considered as part of your commute rather than business travel.
The base of operations doesn’t have to be a single building, in some circumstances it could be a larger geographical area, your general area of trade. If you live some distance from your area of trade, it gets more complicated. In this case, the journey from home to the area of trade could be counted as your commute. As the commute is not allowed, this part of the travel would be disallowed as a business journey.
Working out the base of operations can be tricky for certain businesses. If you aren’t sure, then this is something you can discuss with your accountant.
For a limited company, the director and other employees fall under the rules covering employee expenses. These rules look at which expenses can be reimbursed without being classed as a benefit in kind.
For an employee, the travel has to be necessary as part of the duties of their job. This could be because it is directly as part of the job itself or because they have to visit somewhere in the course of their job.
This is broadly the same as expenses having to be wholly business related for sole traders and partnerships. But the focus and detail is slightly different; you have to consider the person and the job role rather than the general business.
There is no concept of base of operations for employees, instead we look at whether it’s a permanent or temporary workplace.
A permanent workplace is a place at that you attend regularly for the performance of the duties of the employment
The employment contract usually states the permanent workplace and this is normally a good indication. However for tax purposes, it’s the pattern of work that dictates the permanent workplace and sometimes it may not agree entirely with the contract.
Here are some other common indicators of a permanent workplace, although these will vary depending on the specific job:
Travel to your permanent workplace is your normal commute, so you can’t claim expenses associated with that journey.
HMRC have some specific measurements to determine whether exactly how much time must be spent for somewhere to be classed as permanent rather than temporary.
As with the sole trader / partnership, a workplace doesn’t necessarily have to be an office, factory or shop.
Your permanent workplace can be home.
It’s possible to have more than one permanent workplace. If you travel between two or more permanent workplaces, the trips between can count as a business journey. You can claim the expenses for this. What you can’t claim is the journey to and from home at either end.
A depot or similar base can be a permanent workplace even if you don’t spent that much time there (Depot and Bases rule). It can be classed as permanent if it’s the base from which you work regularly or are routinely allocated tasks.
The permanent workplace doesn’t have to be a specific building, it can be a larger area. If the duties of employment are defined by a specific geographic area then that whole area is the permanent workplace (the Area rule). If you live outside the boundary of your work area, then the journey to and from the boundary is your normal commute. Journeys inside the boundary are business travel and allowable.
A temporary workplace is somewhere that you attend in the course of your job that doesn’t qualify as a permanent workplace. The two key aspects are:
You can only claim for necessary attendance. If you chose to work at a temporary workplace because it’s preferable or easier, then no expenses can be claimed.
Travel to a temporary workplace in the course of your business duties is classed as a business journey. You can therefore claim any expenses associated with that journey.
However, if you’re going to a temporary workplace that has a similar journey to your permanent workplace, then you can’t claim those expenses. For example, offices in the same travelcard zone in London, buildings located close to each other, journeys in the same direction and similar length.
How about if you have to drive by or close to your permanent workplace on the way to a temporary workplace? Do you lose the commute part of the journey? If you don’t stop then you are fine and the whole journey can be claimed. However, if you do stop at your workplace and perform some duties, then you have to split the trip into two parts, the normal commute part and the permanent to temporary workplace part.
A temporary workplace can become permanent even if you haven’t been there for more than 24 months.
In the 24 month rule, it is the “expect to” part that becomes important. It doesn’t matter if your role at a particularly location is in month 1 or month 24. As soon you expect to be there for more than 24 months for more than 40% of the time, it becomes a permanent location.
So if you’re 6 months into a 12 month placement and it gets extended for another 2 years, then it immediately becomes your permanent workplace. It doesn’t matter that you’ve only been there 6 months, it’s how long you expect to be there that counts.
The reason this is important is because, as soon as it becomes your permanent workplace, the home to work trip is no longer a business journey and you can’t claim for any associated expenses. It has become your normal commute.
In many ways the rules around business travel are similar across all business structures as the overall intention is the same. However the workplace definition for employees is more rigidly defined and complex than for sole traders. So if you’re moving from one business structure to another, this is something to watch out for.
The first step is to work out your base of operations or permanent workplace (depending on your type of business). This gives you the basis for whether you’re making a business journey or just carrying out your normal commute.
If you’ve firmly established that you’re making a business journey then you can claim the associated expenses such as motor costs, meal or accommodation costs. These type of expenses are broad topics in their own right and will be covered in the future.
If you’re in doubt about your base of operation, your permanent workplace or whether something counts as business travel, then this is something you can discuss with your accountant. If you would like to chat to us then just email to tax@cooperfaure.co.uk.
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