For a sole trader or partnership all travel and subsistence is allowable
against tax so long as it is a trading expense, even travel between the
workplace and your home. However, if you trade as a limited company,
the rules are much stricter as you are an employee and director of your
company, even if you only draw a small salary. Normally, employees
are not allowed to claim for fares to work or for lunch, but if you are based at a temporary workplace, then you can as you are not regarded
as being at your normal place of work.
The Revenue accepts that you are at a temporary workplace if you do
not spend more than 40% of your time there, or if you do not expect to
be there more than 2 years. It therefore makes good sense to ensure
you are not regularly based at any one workplace more than twice a
week or that any contracts requiring your attendance more often then
this come up for renewal within 2 years.
However, care needs to be taken with this as consecutive contracts
with different clients may be deemed by the Revenue to be based at
the same workplace (the Square Mile is a good example). Also, it is the
expectation that counts, so if a rolling contract is automatically
renewed every 3-6 months the 2 year limit may be irrelevant after just
one year. Contractors working for umbrella companies should make
sure that their assignments form part of an over-arching employment
contract between them and the umbrella company.
Season Tickets
Particular care needs to be taken with season tickets as they allow you to travel whenever and wherever you like for a specific period. If you claim these on expenses, the Revenue will normally insist that they are treated as taxable benefits because they do not satisfy the requirement that they are wholly, exclusively and necessarily related to your employment, even if you only use them to travel to a temporary workplace. Their argument is that you could use them for personal reasons if you wanted to – the fact that you don’t is neither here nor there. The same goes for Oyster card top-ups in principle. However, most tax offices are fairly reasonable about this and will allow you to claim a fair percentage for travel to a temporary workplace tax free, so it is always a good idea to negotiate with them. Sole traders and partnerships will get a fair deduction for these sort of costs anyway as they are not subject to the rules on employment expenses.
Scale Rates
If you are entitled to claim for travel to a temporary workplace then you are also allowed to claim for subsistence. The same goes for business trips where you are away for at least a day. Normally you would need to keep receipts for lunch, beverages and other subsistence but the tax man recognises that this is not always feasible so he has introduced a set of scale rates. So long as you are away from home for the requisite number of hours, you can claim these scale rates irrespective of whether you spent that much or not. The scale rates are as follows:-
- £5 if you buy breakfast and start your journey before 6am
- £5 if you are away more than 5 hours and buy one meal
- £10 if you are away more than 10 hours and buy 2 meals
- £15 if you are away later than 8pm and buy an evening meal
You are only allowed to claim for up to 3 meals so the daily maximum
is £25. Also, you must actually buy a meal. Packed lunches don’t count
apparently so if you bring your own sandwiches make sure you buy a
bottle of water or some fruit whilst you are on the road.
Of course, if you keep the receipts you can claim the actual cost of
subsistence even if it exceeds the scale rates, so long as it is
reasonable.
