Home-to-work travel costs during a strike
During the recent rail strikes several of your employees made alternative travel arrangements to commute to work. To recognise their efforts you want to reimburse their extra travel costs. How should you account for any tax and NI on this?
Normal commuting
You’re probably aware that the cost of travel to and from an employee’s normal workplace is not tax deductible for them and if reimbursed or paid for by their employer is taxable income (usually a benefit in kind). But there are exceptions.
Where there’s a strike or other industrial action that causes disruption to public transport a special exemption applies. This allows employers to meet the cost of their employees’ travel to and from work directly, or by reimbursement, tax and NI free. As you would expect there are limitations and conditions to the exemption.
The exemption only covers payments made by an employer. If an employee incurs extra costs but isn’t reimbursed they aren’t entitled to a tax deduction for them.
Overnight stays
The exemption also applies if the disruption to public transport means that an employee has to stay overnight and the employer pays or reimburses the cost of accommodation and subsistence. HMRC’s approach to this is that the exemption applies if the employee can’t “easily” commute. For example, they may get to work but can’t easily return home because of strike action.
Strike or other industrial action
The exemption can apply to any situation where an employee’s commute is disrupted by a “strike or other industrial action”. This doesn’t have to be action directly taken by public transport workers. For example, the exemption would apply if an employee’s commute by bus was prevented because roads on their route were blocked due to a protest march by striking workers other than the bus drivers.
How much disruption?
For the exemption to apply an employee’s usual commute by public transport must be “disrupted”. The rules don’t indicate how much disruption is required before the exemption can be used. Our understanding is that HMRC takes a realistic approach. For example, while the recent rail strikes didn’t always prevent all trains from running the service was so patchy and unreliable that the exemption applies.
Temporary workplace
The exemption doesn’t extend to employees commuting to a temporary workplace. For example, a shop worker is temporarily working away from their normal location because of staff shortages. This seems unfair but there’s good news.
A different exemption allows employers to pay an employee’s commuting costs tax and NI free if they are working at a temporary location. Unlike the first exemption, if an employer doesn’t meet the cost, the employee can claim a tax deduction for the expense incurred.
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