Travel expenses can be a complex issue to understand when needing to claim tax relief, maybe more so when it is in relation to contractors fulfilling temporary work contracts. Below we take a look at one example case and determine what is best practise when carrying out this type of employment.
When claiming travel expenses it is important to be certain about an employee’s place of work. This was highlighted in the First Tier Tax Tribunal case of Nigel Ratcliffe V HMRC in 2013. Mr Ratcliffe had claimed a deduction against his earnings for travelling expenses between his home address and a number of different work locations.
The Claim
The tribunal needed to decide whether the different locations were temporary or permanent workplaces. No deduction from earnings is allowed for travel between a home and the workplace, if the workplace is deemed to be permanent rather than temporary. If the workplace is deemed to be temporary however, then a deduction is allowable for travel from home.
The role of Mr Ratcliffe was to monitor and maintain the tools required for the closing down of power stations. He had worked under two short term contracts relating to separate power stations in the tax year under review. He also worked under a retainer contract which required him to work at various sites to be specified by his employer during the contract period.
The Decision
On all three contracts Mr Ratcliffe claimed for relief to cover the costs of travel from his home to his accommodation near to each of the various power stations. HMRC agreed that the retainer contracts were temporary however, they stated that Mr Ratcliffe was working at a permanent workplace whilst working under the two contracts. The tribunal also agreed with this decision.
The Explanation
The relevant legislation states:
“A place which the employee regularly attends in the performance of the duties of the employments is treated as a permanent workplace and not a temporary workplace if the tasks to be carried out in the performance of those duties are allocated there.”
The short term contracts stipulated that Mr Ratcliffe was to attend a specified site and therefore under the terms of the contract the specified location was a permanent workplace.
“A place is not regarded as a temporary workplace if the employee’s attendance is comprising all or almost all of the period for which employee is likely to hold the employment.”
Mr Ratcliffe worked at one power station for the entire duration of each short term contract and therefore under the legislation was precluded from treating that location as a temporary workplace.
A deduction would have been allowed for the expense of travel from home to the various power stations, if Mr Ratcliffe’s contract had been drafted as a retainer contract based from one location. Some care at the outset of the employment in 1999 may well have saved this particular tax payer significant amounts of personal tax.
Travel expenses can be a key area that HMRC focuses on when looking into contractors tax affairs. To ensure that you are conducting your business in line with legislation or for more information please contact us.
