The days when most people commuted every day to the same place of work are long since gone but, according to the tax services department at London based accountants Baker Tilly, nobody seems to have told the taxman. They cite numerous examples of modern day roles that demand travel to a variety of different locations but say that the current income tax rules need adjusting to take account of people who are obliged to journey long distances but are being taxed for the privilege.
Tax services professionals point out that, under current legislation, anyone travelling to a permanent place of work and is then reimbursed for the cost of the journey has to pay income tax and national insurance on any expenses that are claimed to cover it. Tax services providers also advise that employers get hit with 13.8% national insurance on the same amount. We are not talking here about travel costs to business meetings at other people’s premises but what HMRC regards as the costs of commuting to a permanent place of work.
Let’s take the example of a national sales manager who has to visit 5 different regional sales offices on each day of the week. Because he is travelling to the same places every week, tax services experts will tell you that he will be viewed as commuting to permanent as opposed to temporary places of work and that the cost is therefore deemed to be a personal cost of the employee or director. Even if the employer provides a company car and petrol account, tax services specialists will tell you that this is a benefit in kind and liable to both income tax and national insurance.
Another prime example according to tax services professionals would be a non-executive director who has vast experience of the oil industry and sits on the board of three public oil companies, one based in Cheshire, one in London and one in Aberdeen. He normally has to attend a monthly board meeting in each location. The tax services providers explain that, as with the case of the national sales manager, there is no point in his moving home nearer to one location to save travel costs because it will mean he is further away from at least one of the other locations.
These two examples would clearly involve commuting travel costs running into thousands every year and tax services experts are concerned that many more employees are now suffering at the hands of this tax anomaly. Today’s more efficient working practices have resulted in so many extra working people having to visit different company locations on a regular basis and it seems rather unjust that they are being penalised compared with all those who just commute a few miles up the road to the same location every working day.
Fortunately the Treasury appears to be at last waking up to these anomalies and is holding open consultations with providers of tax services on the very subject of travel and subsistence costs ahead of the next Autumn Statement and it is hoped that tax services professionals who see this sort of unfair treatment on a regular basis will be listened to.
If you have any concerns or questions regarding commuting costs or other specific areas of tax, the specialist tax services team at Baker Tilly will be only too pleased to help.