One of the big changes to working patterns that has stuck following the pandemic is hybrid working. This allows individuals the flexibility to work from home for part of the time, and in their employer’s workplace the rest of the time. This way of working remains popular, but it can lead to confusion for employers about the tax consequences for travel expenses for employees who work both at home and in the office.

Last year, HMRC updated their guidance on tax and employee travel to restate the position. While the usual rules around the nature of the workplace (is it permanent or temporary?) still influence whether employer reimbursements can be made tax free or not, with any form of home working, it’s also necessary to consider whether the individual is working from home by choice.

Background – permanent or temporary workplaces, and ordinary commuting.

Broadly, an employer can reimburse an employee without tax consequences for the costs of travelling to a place they need to attend for work, unless that journey is ordinary commuting – which includes travel from the individual’s home to their permanent place of work.

Most of the time, identifying a permanent workplace is easy, for example where an individual travels to the same shop, factory or office every day. If they are attending it regularly, it is likely to be a permanent workplace.

An individual can have more than one permanent workplace, but they will still not be entitled to tax-free reimbursement of travel from home to any of those workplaces. Provided neither workplace is a home, then they should be entitled to tax-free reimbursement of costs for travelling between those workplaces for work purposes. But if either one is a home, it’s more complicated.

It is also possible that an individual might be travelling to a temporary workplace – either from their home or another permanent workplace - in which case they can be reimbursed by the employer for travel costs without tax consequences (as long as HMRC mileage rates are used where the individual is travelling in their own vehicle).

A temporary workplace is one which is attended for a task of limited duration or temporary purpose. The rules are complex, but broadly the individual must either attend the workplace for a temporary purpose for less than 40% of their working time if they are going there on a continuing basis, or be expecting to attend this workplace for less than 24 months.

Hybrid workers

Hybrid workers, working both at their home and in the office (or equivalent employer site), may want their employer to reimburse them for the costs of coming to work, seeking to argue that their home is now their main base and they are travelling between two permanent workplaces. However, employers need to be careful, as such travel could still be ordinary commuting, meaning any reimbursements will be taxable.

In the example that HMRC have added to their guidance (example 42), an individual is offered hybrid working by their employer and moves from working full time in the office, to working some of the time at home and some of the time in the office.

The key factor here which prevents tax relief is that the individual is offered the choice to do this – working at home is not required by their employer.

Home working

Where an individual has been moved to homeworking not through choice but because the employer requires it, then the potential to reimburse travel costs can open up, but only on days that the employee’s home is considered a workplace (example 41 in HMRC’s guidance).  HMRC guidance also states that such travel must be carried out in the performance of the duties of the employment.

HMRC will not accept that working at home is an objective requirement of the job if the employer provides appropriate facilities in another location that could be practically used by the employee, or the employee works from home as a matter of choice.

Document any changes

Finally, regardless of the tax position, it is important that any changes to workplaces are documented. If there is a move to either full homeworking or hybrid working, existing contracts should be updated to reflect the new agreement.

This will help to provide evidence of where the employee is meant to be – not just useful for employment expenses and evidence, if needed, to show HMRC that the position has changed, but also for general management of staff.

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.  

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