Written by Ray Coman
Provided your journey is for a business purpose and is not considered to be ordinary commuting, the travel costs can be deducted from taxable income. Ordinary commuting, which is defined as travel between your home and your permanent workplace, is not tax deductible.
In general, a permanent workplace is a location where you carry out your employment duties for a time of continuous work which lasts, or is expected to last, more than 24 months.
Continuous work is considered to be carried out at any place where you spend more than 40% of your working time. The percentage is based on the number of hours that are worked in all places, such that a part time worker would exceed the limit working fewer hours at a given workplace than a full time worker.
A workplace only becomes permanent when both the proportion of time spent and the length of time spent exceed the above limits. Therefore, if you spend less than 40% of your working time in a place, then it may not be considered a permanent workplace regardless of the number of months that you carry on working there. Similarly, where you work at a place for more than 40% of your working time, the workplace may not be permanent where your duration lasts, and is expected to last, less than 24 months.
If there is an expectation for your stay at the workplace to last for less than 24 months, but you end up staying for longer, travel expenses to this workplace will be disallowed from the date on which the expectation changed to being longer than 24 months.
An expectation is normally established by a written contract, although it can be established for tax purposes in other less concrete ways. For instance, relocating to be nearer a new workplace is a factor which can indicate that you expect to be at the new workplace permanently. Regardless of expectations, a workplace will become permanent once you have been there more than 24 months.
A contract which is for an indefinite period, by its nature, sets an expectation for a period of employment longer than 24 months. For indefinite contracts, and other agreements where the expectation at the outset is for a contract lasting more than 24 months, all travel to the workplace where that contract is carried out could be commuting.
Where the work is expected to last for more than 24 months, but it turns out lasting for a period shorter than 24 months, the travel to this workplace can still be commuting.
Although, as a self-employed person you would not have an employment workplace, travel can still be considered to be commuting and therefore not tax deductible. If you are self-employed and have a base of operations, then travel between your home and this workplace is treated as ordinary commuting. However, if your base of operations is also your home, then travel from home to another workplace would not be ordinary commuting.
It often confusing to decide whether travel expenses are tax deductible, however the tax implications can be significant, particularly where the costs of overnight stays are related to this travel, or the travel is largely overseas. At Coman & Co Chartered Tax Advisers, we can advise based on your circumstances. Please contact us for an initial consultation