Domestic care workers should record mileage
Meredith McCammond explains why good mileage records are needed for tax and national minimum wage (NMW) purposes, particularly for care workers who travel between client’s homes.
Domiciliary care workers (those that travel around looking after people in their own homes) are one of the few categories of workers that can legitimately claim their home to work travel costs as tax-deductible.
This claim is either under ITEPA 2003 s 337 because like a “service engineer who moves about from place to place during the day, carrying out repairs to domestic appliances at client’s premises” their duties inherently involve travelling (see EIM32366). Or it is because (even if the worker does not have a travelling appointment) it is likely that for many such workers, every place that they attend qualifies under the “temporary workplace” rules.
Travelling while working
Despite this, in the case of Amara Akhtar (TC07676), HMRC sought to calculate a care worker's mileage on the basis of the travel undertaken whilst working only – and not including the travel between her home and the first and last job of the day.
Although it is not clear, it is possible HMRC's stance is taken from the guidance contained at ESM2019, which says: “However, some agency workers undertake a number of different jobs on the same day. Examples include nurses or domestic workers. In these cases, you can accept a deduction for the cost of travel between different jobs on the same day. You should not accept a deduction for the cost of travel from home to the first job of the day or to home from the last job of the day”.
However, the FTT disagreed with HMRC and found that travel between Akhtar’s home and the first and last job of the day should be included.
Record the mileage
Whilst there were some errors in the taxpayer’s own calculations of her mileage, the FTT decision on this aspect of her case was most helpful to her. However, in calculating the 'correct' mileage, including home to work mileage, the tribunal resorted to using records recreated retrospectively based on samples of scheduled client visits pulled from her employer’s system, extrapolation and Google maps.
Interestingly, neither the employer nor the taxpayer seems to have kept any contemporaneous records of the actual mileage concerned, despite the fact that no mileage reimbursement was made (not even at the 20p per mile rate typical for this industry) and that the numbers of miles in each of the tax years concerned was significant (more than 15,000 each year). This is extremely surprising– particularly on the part of the employer – because of the interaction between mileage and the minimum wage rules.
The calculation for establishing a worker’s rate of pay (for NMW purposes) for a pay reference period is P/H – where P is the worker’s NMW pay and H is the hours worked.
In the case of care workers, who are generally “time workers”, H effectively means the time they spend working in the client’s home (contact time) and the time spent travelling between their different clients during the day. For NMW purposes, it is worth noting that any time spent on such home to work travelling is not considered as working time and is not treated as hours worked when calculating H.
In terms of P, a payment made by a worker to a third party will always reduce the worker’s NMW pay if it is in connection with their employment and not then reimbursed by the employer.
“In connection with their employment” is not specifically defined in the legislation but can be taken to include costs incurred in the course of their work, but not costs incurred in travel between home and place of work. The meaning of “costs” is equally unclear. The LITRG understanding is that where workers are using their own cars to travel to appointments, the “costs” are probably limited to petrol expenses rather than including any contribution towards wear and tear or other vehicle-related expenses.
Risk of NMW underpayment
What all this means is that a care worker's pay must average out at or above the NMW rate, once you factor in the time they spend in the client’s home, time spent travelling between their different clients during the day and their associated out-of-pocket expenses; otherwise, there will be an NMW underpayment.
Given the low pay rates of care workers (usually no more than 15% above the NMW) not having their mileage reimbursed at all can vastly increase the likelihood of NMW underpayments – and the higher the proportion of travel, the higher the risk.
It is therefore extremely important that care workers keep good, detailed mileage records (LITRG have a template of a mileage log that care workers can use in the LITRG factsheet for care workers) – not only to support a claim for tax relief (and in some cases to deduct certain expenses when calculating income for tax credits and other benefits) but so that they can self check their position under the minimum wage rules.
It is also important - for those that do work for diligent agencies that keep mileage records for travel between clients (and who might make mileage payments in respect of such) – to appreciate this will not capture everything that is allowable for tax purposes and is thus, is not the end of the story.
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Meredith McCammond is a Technical Officer for LITRG and Chartered Tax Adviser, formerly in practice. LITRG is an initiative of the Chartered Institute of Taxation which is a charity. Since1998, LITRG has been working to improve the policy and processes of the tax, tax credits and associated...