The Covid-19 pandemic fundamentally changed how many employees work, with working from home suddenly becoming the norm. Since the pandemic, many employees have experienced a partial return to the office, leaving their working week split, with some days spent in the office and some working from home.
To reflect this shift to ‘hybrid’ working patterns, HMRC have updated their guidance on ordinary commuting and private travel with a new example explaining the tax treatment of commuting costs incurred by hybrid workers.
Ordinary commuting
To recap, travel between home (or a temporary alternative, such as staying overnight with friends or family) and a permanent workplace is classed as ‘ordinary commuting’ and no tax relief is available for the costs incurred.
Hybrid workers
Hybrid workers commonly choose to split their working week between home and the office (or equivalent place of work). For instance, they might work a flexible week with three days in the office and two spent working from home.
For this type of employee, their home does not become a ‘workplace’, primarily because of the flexible nature of their working arrangements. The office (or equivalent site) will remain the employee’s permanent workplace assuming the employee goes to the office on a regular basis and performs duties there which are not of a temporary nature.
As a result, no tax relief is available for travel between home and the office and any reimbursement of, or payment for, those travel costs will be taxable. If the employer reimburses ordinary commuting, the payments will need to be taxed and subject to NIC through the payroll as if they were additional salary. If the employer pays for the commuting costs on the employee’s behalf, a benefit in kind will arise meaning tax is payable by the employee and Class 1 NIC by the employer.
Additional costs of home-working
The status of an employee’s home when considering the tax position of commuting costs does not directly determine the availability of tax relief for additional costs of home-working.
However, since hybrid workers generally choose to work from home for part of the week but have alternative working facilities provided for them elsewhere, they are unlikely to qualify for any tax relief for additional domestic costs of home-working. Further information on tax relief for employees for additional costs of home working can be found in our video on tax relief for homeworkers.
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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