Coronavirus and employee travel expenses: tax and NIC considerations

26 June 2020

As the lockdown is eased and employees start to return to their offices and workplaces, employers may look at meeting employees’ travel expenses. This might be because the employer is taking precautionary measures to keep their employees safe while cases of coronavirus persist.

For example, an employer might ask employees to avoid public transport while travelling to and from work and provide and/or meet the cost of taxis to take them between their homes and workplaces.

What are the employment tax and NIC considerations?

Our previous newsletter article from 30 August 2019 explains the tax and NIC rules relating to employee travel and subsistence expenses. As highlighted in that article, this is an area where we see frequent tax compliance problems.

The rules highlighted in that article continue to apply, even where the travel costs are met by the employer because of the coronavirus and from a need or wish to keep their employees safer when travelling to and from work.

If an employer meets the cost of taxis (or other transport costs) between an employee’s permanent workplace and their home, the general position is that this cost will be treated as employment income and must be taxed, subjected to NIC, and reported to HMRC in the appropriate way. This is because journeys between an employee’s permanent workplace and their home (assuming their home is not accepted by HMRC to be a workplace) are regarded as private or ordinary commuting journeys, not business travel.

In certain circumstances where taxi costs for such journeys are met by the employer, there may be exceptions to the general rule highlighted above. For example, where qualifying late night taxis are provided and/or the purpose of the taxi is to replace car sharing arrangements that have stopped because of exceptional circumstances (see the HMRC guidance at EIM10210).

Have there been any HMRC concessions?

To date there have been no significant concessions or relaxations to the rules on employee travel expenses as a result of the coronavirus.

The only HMRC concession is that, where free or subsidised transport is made available by the employer because of the coronavirus and is taxable and liable to NIC, HMRC have agreed that the cost can be reported and dealt with through a PAYE Settlement Agreement (PSA). This means that the employees’ tax and NIC position will not be disturbed, although it will result in the employer paying the tax and NIC due on a grossed-up basis.

For further information on PSAs, please see our previous newsletter article from 31 January 2020.

What about employees who return to temporary workplaces as the lockdown is eased?

Special care needs to be taken in these circumstances as complex rules can apply.

Where an employee was working at a temporary workplace, but that was interrupted by the coronavirus (for example they stopped working at the temporary workplace because they were furloughed or started to work from home instead), if they subsequently return to that workplace they will be working there in two stages, with a break in attendance in between.

When an employee returns to the temporary workplace the breaks in attendance rules must be considered to identify whether that workplace still qualifies as a temporary workplace when they return.

The question is whether the employee will spend, or is likely to spend, 40 per cent or more of their working time at that temporary workplace over a period of continuous work of more than 24 months when they return. The period of furlough or working from home will form part of the period of continuous work.


An employee was working at a temporary workplace for 20 months and was then placed on furlough for April, May, and June. When they return to the workplace for three months after the period of furlough, it will cease being a temporary workplace from the date that they return.

This is because, when they return, the expectation is that they will spend 40 per cent or more of their working time at that site over a period of continuous work which exceeds 24 months and so the workplace stops being temporary (ie the period of continuous work totals 26 months, being 20 months’ work, three months’ furlough, and three months’ work).

Tax and NIC will be payable on any payments of travel and subsistence expenses the employer meets in respect of the employee’s attendance at that workplace from the date that they return. Only the first 20 months would qualify for temporary workplace relief.

These breaks in attendance rules can be complex and are likely to be particularly relevant to employers with highly mobile workforces.

How can RSM support you?

We can help you in several ways, including but not limited to:

  • helping you understand the rules as they apply to your workforce;
  • helping you identify issues that might arise so that you can fix these and optimise compliance before a HMRC review;
  • helping you set up your expenses system, drafting your expenses policy, and updating your processes to minimise the complexity and associated administration burdens, while ensuring compliance; and
  • updating your employee benefits reporting processes to ensure they are aligned with the latest rules and HMRC policy, e.g. P11Ds, PSAs, and payrolling of benefits in kind.

For more information or if you have any concerns, please contact Lee Knight or Susan Ball.