As restrictions continue to be slowly eased and workers start to return to the workplace after many months at home, we assess how the new normal may look from an employment perspective, and the tax implications of this.
Since the government announced in March 2020, that offices and workplaces should be closed and employees work from home, there have been numerous support packages made available.
For employees, the two key elements of support have been:
Employees have already started returning to the office/workplace and there is no doubt that this will continue. That said, most commentators acknowledge that post pandemic, the “new normal” may involve a combination of home and office working, in effect a new hybrid structure.
So that leads to the question of what or more importantly where, is an employee’s permanent workplace(s) versus a temporary one and what travel costs may be reimbursed without incurring a tax liability.
The concept of homeworking isn’t new and many employees have done so for years. However, it is important to distinguish between occasional/informal homeworking and a proper homeworking agreement.
In simple terms, where an employee is provided with office/workspace in which they are expected to work, then this is very likely to be their permanent workplace. If the same employee elects to work at home (or elsewhere for that matter) from time to time in an informal manner, then this does not change anything.
Typical examples would be choosing to take work home for an evening, or perhaps to complete a piece of work on a different day at home. In such cases, travel from home to the workplace is normally at the employee’s expense, but if reimbursed by the employer, would be a taxable benefit because this is ordinary commuting.
A formal homeworker is considered very differently. In this case, they are contracted to work from home full time and most likely would have a dedicated workspace within their home from which they work. Importantly, this cannot be at the request of the employee. The employer must initiate any such arrangement on the basis that no dedicated office space is available (present or future) at the firms offices/premises. Structured correctly, the home would become the permanent workplace and the costs of travel to any other workplace (of the employer or perhaps customers/clients) would not be taxable, if reimbursed.
It is worth noting at this point that as a result of the pandemic, many offices have downsized and employees no longer have a dedicated desk. When they do have to attend periodically for a temporary reason, they will have to find a spare desk (i.e. “hot desk”). For that reason, it may support the above statements that an employee no longer has any dedicated workspace, in effect, the crux of the new hybrid ways of working. But the employer has to initiate this… the employee cannot simply request.
The above is not overly difficult to digest and apply. However, things start to get potentially problematic when an employee splits their time between home and the workplace on a fixed or regular basis.
As has already been explained above, informal working from home does not change an employee’s permanent workplace. Working from home full time under a formal agreement, with occasional business travel also does not change the home as being the permanent workplace. But what about where an employee splits their time between both?
We should first consider the definitions of permanent and temporary workplaces…
Ordinary commuting is considered by HMRC to be travel between a person’s home and their permanent workplace(s).
A place is a permanent workplace if the employee attends it regularly for the performance of the duties of the employment, and it’s not a temporary workplace. An employee attends a workplace regularly if their attendance is frequent, follows a pattern and is for most of the period they are likely to hold that employment.
A temporary workplace is somewhere the employee attends only to perform a task of limited duration or for a temporary purpose, even if attendance is regular.
So, now let’s apply the rules to some typical scenario’s employers are facing.
As has been highlighted, the rules on travel between workplaces vary, depending on their designation as permanent or temporary, as well as the reasons for attendance. HMRC legislation is also extremely strict on the allowability of such costs.
What should be made clear is that, if an employer isn’t reimbursing an employee for travel, then there really is no risk for the employer. An employee who works at home by choice and an employee working at home under a formal agreement, do not differ if they are not claiming any travel costs.
It is only where an employer intends to reimburse travel between home and a workplace (especially a pre-pandemic workplace) that care should be exercised.
If you would like assistance in checking which travel expenses are taxable, or adding them to your P11D and PSA forms before submission to HMRC, Crowe can assist. Please get in touch with your usual Crowe contact.