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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.

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

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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.

Thanks (0)