I probably get asked more questions about whether travel costs are an allowable cost for tax than almost anything else so I thought I’d do a quick summary of the rules for both employees and the self-employed.
Employees – which includes company directors
Travel between home and a permanent place of work, i.e ordinary commuting is not an allowable cost. However travel from home to a temporary workplace or from one place of work to another is allowable. A temporary workplace is defined as somewhere the employee goes to for a limited duration or temporary purpose, with the posting either being less than 24 months or taking up less than 40% of the employee’s working week.
For small companies the main place of work will often be their home address so any travel from home to other locations where they are carrying out work will generally be allowable provided it doesn’t fall foul of the 24 month.
For the self-employed the basic principle is that expenses are only allowable if they have been incurred “wholly and exclusively” for the purposes of the business. If travel costs are however incurred partly for personal and partly business it is permitted to split the costs between the two elements and claim the business part.
The self-employed will often have their base of operations at home so the cost of travel between home and where they work would normally be allowable in this instance.If however they have a base of operations that is separate from their home then the cost of travel to that base would be treated as ordinary commuting and therefore not allowable.
For car travel it is often simpler to make a claim using the approved mileage allowance of 45p per mile for the first 10,000 miles in a tax year reducing to 25p, rather than keep a records of all car costs in the year and then try to split them between business and personal elements.
Records do need to be maintained to support all travel claims and kept for 6 years I’m afraid….