Emma Clewes, head of tax advisory at Prime Accountants Group, discusses the tax implications of employees asking to have their travel and commuting costs covered
As more businesses are now requiring staff to return to the office on a more regular basis, some employees are now asking to have their travel and commuting costs covered. But what are the tax implications of this?
I’m aware of a number of large retail corporates who are requiring head office staff to come back to the office full time. Where a business has some staff who can’t do their jobs from home – for example, drivers, store operatives or retail staff – the business can’t function unless they work onsite.
Part of this is about addressing a disconnect between employees and business, and the feeling that it’s unfair people from head office don’t go to the office when others have to.
However, the tax implications for a business come down to whether an employer recognises home as a permanent place of work.
A lot of people started working from home during COVID, but their underlying contract may not have changed while working from home has continued to happen. Many businesses may not have reviewed or updated expenses policies to align to hybrid working policies.
However, the rules are clear. Unless your home is a permanent place of work, travelling to the office is not a business expense.
The problem businesses are having is the job market is buoyant, and if they are worried about losing staff then they may have to incentivise them. Part of that could be paying a ‘top up’ for travel to the office or reimbursing travel expenses. This would have a tax effect on the individual and the company as it would be treated as additional reward.
There seems to be a misconception that this new hybrid working world has somehow rewritten the rules and this is not the case.
My message to businesses would be to think carefully about what your expenses and hybrid policy says. If nothing has changed since before the pandemic, then coming into the office is always what it was.
It does depend on individual business’ working practices, as one size doesn’t fit all. If you recognise home as a permanent place of work, there’s a knock-on effect there too, with HR, IT security, expenses for equipment and so on.
If a business is thinking about making a shift in working practice – whether that’s working from home, encouraging people to cycle or take the train to work – you have to think about it carefully as there are legal and tax implications.
You need to communicate effectively. What is in staff’s contracts versus the accepted status quo will be different, so the recommendation is to formalise it.
