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Worksites not temporary, tax relief denied

HMRC denied a defendant's claims for travel and subsistence costs on the basis that the construction sites were not temporary workplaces attended for less than 24 months.

18th Sep 2020
Tax Writer
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Mr Sambhi is a construction worker and has worked for the Lend Lease group since June 2007. Lend Lease undertakes construction work throughout the UK, and Sambhi can be required to work at any of Lend Lease’s project locations across the UK.

Sambhi’s home is, and always has been, in Birmingham. However, between September 2013 and September 2019, he worked on 11 projects around Greater London.

Sambhi lived in temporary accommodation from Monday to Friday and would travel to and from his temporary accommodation to his assigned construction site each weekday. He returned to his home in Birmingham at weekends.

Tax relief for travel and subsistence

As a matter of general law, the cost of commuting between home and the workplace is not a deductible expense against employment income.

However, s338 and s339 ITEPA 2003 allow deductions for travel and subsistence expenses incurred in travel to a location that is not a “permanent workplace”.

If a workplace is a "temporary workplace", then relief can be claimed in respect of all travel costs.

However, s339 ITEPA 2003 can apply to prevent a workplace from being temporary. Broadly, s339(5) is in scope where an employee attends a workplace in the course of a period of continuous work that lasts, or is likely to last, more than 24 months (the “24-month rule”).

HMRC deny relief under 24-month rule

HMRC denied claims made by Sambhi in his 2015/16 and 2016/17 tax returns for travel and subsistence expenses. The tax due for both years amounted to £19,993.60: £10,030.40 for 2015/16 and £9,963.20 in 2016/17. Sambhi appealed against the HMRC review decision [TC07717].

HMRC accepted the project Sambhi worked on in Putney between September 2013 and April 2015 was a temporary workplace, and allowed his claim for relief in respect of travel and subsistence allowances for this period. However, HMRC argued the 24-month rule applied to deny relief for travel and subsistence expenses to the other sites.

The taxpayer argued that HMRC did not follow its own guidance at Guide 490, which at 3.24 states that construction sites are considered temporary workplaces where the employee’s attendance at the site is not expected to last longer than 24 months.

Issue before the first tier tribunal

The fact that each of Sambhi’s project locations was capable of being a temporary workplace was not in dispute. As such, the issue to be considered was whether any of the project sites were prevented from being a temporary workplace under s339(4) or s339(5) ITEPA 2003.

In this case, the specific question that fell to the first tier tribunal (FTT) was whether s339(7) ITEPA 2003 applied to the taxpayer’s transfer from one project to the next. 

In practical terms, this meant the FTT had to consider whether there had been a substantial change to the journeys made by Sambhi when the project locations changed, or whether there was a substantial change in his travel expenses.

If, as HMRC argued, there was no substantial change and s339(7) applied, all of Sambhi’s work sites in Greater London would be treated as a single workplace. As Sambhi’s work across the various sites spanned more than 24 months, the “24-month rule” then comes into effect, denying relief for his travel and subsistence expenses.

If s339(7) did not apply (i.e. each site was considered separately), relief for Sambhi’s travel and subsistence expenses would be allowed, as his engagement on each project was less than 24 months.

Average journey times and costs

The FTT considered that the correct approach was to consider the journeys from Sambhi's home in Birmingham to the various construction sites, via the temporary accommodation, but to average them over the week.

The FTT estimated that Sambhi’s weekly travel costs differed by no more than £14 on changing from one project location to another.

When considering the changes in journey time when moving projects, the FTT’s calculations found that the greatest change in a one-way trip time (averaged over a week) was just over half an hour. 

Was there a substantial change?

As “substantial” is not defined in legislation, a dictionary definition was considered.

The FTT found that the essence of the various definitions of substantial was the emphasis on size. Therefore, the FTT found that for something to have a "substantial effect", the effect must be sizable.

The FTT did not consider a change of any more than £14 in Sambhi’s weekly travel costs on changing workplace to be substantial. When it came to the journeys made, while the FTT conceded that any judgement had to be impressionistic, it also found that the difference in average journey times did not give rise to a “substantial effect".

The appeal was dismissed.


By the FTT’s own admission, there was an element of subjectivity when determining if changing sites had any substantial effect on Sambhi’s journey or travel expenses. Invariably, not everyone will agree with the FTT’s decision.

However, there was another potential issue in this case, which the FTT raised, but did not provide full comment on: was the taxpayer’s “temporary accommodation” really temporary, noting that one place was rented for over three years? Or did Sambhi, in substance, have a second home in London, from which he commuted daily to the various workplaces?

Replies (12)

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By alltaxedout
21st Sep 2020 09:58

To me, it seems an unfair result and not in the spirit of the legislation. If the site changed from London to (say) more towards Manchester then presumably that would be OK, yet journey time and cost could be still be similar.

Thanks (4)
Replying to alltaxedout:
By Brian Gooch
21st Sep 2020 10:38

That was my thought. Location could change from somewhere 3 hrs travel east to somewhere 3 hrs travel west, and if cost was similar there would be no substantial change in travel time or cost per the FTT's test, but it could in no way be said that the temporary workplace had not changed.

Thanks (3)
Replying to Brian Gooch:
By bendybod
21st Sep 2020 14:08

You wouldn't be able to stay in the same temporary accommodation to service those two extremes though.

Thanks (3)
Replying to bendybod:
By Brian Gooch
22nd Sep 2020 15:53

Indeed! And the judges' ruling implies as much, but the Aweb report suggests that their decision was based solely on time & costs.

Thanks (0)
21st Sep 2020 11:23

Staying in one "temporary residence" for 3 years seems to me counterproductive. If Sambhi had moved his accommodation with each contract, and certainly well within the 24-month test period, I wonder what the outcome would have been? I have contractors in this position and advise such relocation to support the "temporary" argument. Not yet had any challenge from HMRC - YET!

Thanks (1)
Ivor Windybottom
By Ivor Windybottom
22nd Sep 2020 09:17

It would seem that living in Birmingham and working in various London locations is not treated as moving to various temporary workplaces, but where the worker lives in London and works at the same temporary London locations that worker would have a temporary workplace at each site.

It seems that this the longer commute to the area causes different treatment, which seems a little unfair.

I haven't read the case, but I would wonder if the allowable expenditure should be given for travel from the semi-permanent London base to each site, such that the 24-month rule is not breached?

Wishy-washy tax law again. If only the OTS could actually make a difference and get this written to make it measurable, rather than a judgement call. I live in hope, but will likely die in vain!

Thanks (2)
Replying to Ivor Windybottom:
By rbw
21st Sep 2020 16:28

Ivor Windybottom wrote:

Wishy-washy tax law again. If only the OTS could actually make a difference and get this written to make it measurable, rather than a judgement call. I like in hope, but will likely die in vain!

I'd be very happy to consider and comment on any draft of "measurable" tests. No need to put it into statutory language: happy to consider equations, flow charts, truth tables...

Thanks (0)
By Ian McTernan CTA
21st Sep 2020 15:19

Seems a reasonable decision. Circumstances not really that different to many employees who work mon-fri in London and then go to their weekend house wherever it is.

And three years in the same 'temporary' accommodation didn't help the case.

Claiming the costs to Birmingham and back really wasn't a great idea for that amount of time.

Thanks (1)
Replying to Ian McTernan CTA:
By raycad
21st Sep 2020 23:36

"Claiming the costs to Birmingham and back really wasn't a great idea for that amount of time."

As the tax at stake was c£10k pa it seems pretty clear that it wouldn't have been the travelling costs, per se, that were the biggest factor here. Rather, it would have been the London accommodation costs, which are notoriously expensive compared to most of the UK.

I'm really not surprised at the FT decision. It is entirely consistent with the Booklet 490 examples at paras 4.6 to 4.9. These paras set out HMRC's take on what is meant by the expression "substantial change" (the guidance uses the word "significant", actually, but let's not split hairs). And, in response to Brian Gooch's point, para 4.9 makes it clear that a similar before and after cost but traveling in an entirely different direction will still qualify, subject to the 24 month rule, of course.

Thanks (0)
Replying to raycad:
By Brian Gooch
22nd Sep 2020 15:57

Indeed, 4.9 being a correct application of s339(7) as it would have a substantial effect on the journey. The judges referred in their judgement to the same weekend journey, although the Aweb report implied their consideration was based solely on time and costs.

Thanks (0)
By cfield
22nd Sep 2020 11:23

I get these judgement calls on travel all the time with my contractor clients and I always advise them to hop around a bit. It's also a good idea to vary your mode of transport. Take the train to the central locations, drive to the suburban sites if they can park there, maybe even cycle. It's easier to do this in London as the change in cost/distance/duration is more material relative to the whole journey, but when you're commuting over 100 miles, it's far more difficult.

The legislation also describes a temporary workplace as somewhere you go for a "task of limited duration" and this is written in the singular, not the plural, so you might get away with it if the task is sufficiently different in the next job, even if it happens to be in the same building. That could be measured in terms of key deliverables, but it's only really an option if you are important enough to be more than just a cog in the wheel.

With accommodation, if you can claim for a temporary workplace, the next hurdle is to avoid it becoming a temporary home. HMRC specifically say in Booklet 490 that a pied-a-terre does not qualify, so using the same place all the time is a bad idea. I always cite the example of the Major in Fawlty Towers, but actually it could happen after a very short span of time. Unfortunately there are no precedents or guidance I'm aware of to say when a B&B becomes a home from home. It depends on the circumstances but I would be worried at any stay of longer than 3 months, even if they go home at weekends.

Thanks (0)
By geoffmw1
22nd Sep 2020 12:50

Was Sambhi an employee or was he a subcontractor? In both cases did the company he did the work for pay for his travel and accommodation expenses? If they didn't he needs to go back to them for reimbursement.

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