It’s not surprising that working at home and the tax and other aspects of this are hot topics at the moment, but one surprising thing is the prevalent use of the term “working from home”. You’ll notice we haven’t used this Americanism in our title, because it seems to us to make about as much sense as talking about sleeping from home, or eating from home. But never mind. The world seems to have got used to this rather strange phrase, and we’re no doubt stuck with it now.
One particularly interesting question, which has come to the fore with the prevalence, today, of home working, is the question of whether this changes the tax status of your home as the “base” of your operations. This can be very important as, in some cases, where you travel from your main base to somewhere else, the travelling costs (plus subsistence, ie eating and drinking) can be claimable against tax. So if your base of work has changed from a remote office, or other workplace, to your home, you could be missing out on some tax relief if your returns or accounts don’t keep up with the change.
Employed or Self Employed?
As in so many areas of our tax system, your employment or self employment status makes a big difference to the rules here. If you’re in employment, the fairly tight knit and – comparatively – comprehensible “employee travel and subsistence” rules apply. These allow claims against tax for travel to temporary workplaces, but disallow travelling to permanent workplaces. And this is where there’s been some confusion in the interpretation of the rules recently, in the light of everybody changing their normal commute into a few steps to the back bedroom, or to the garden shed that’s been converted to an office. We’ve seen on the internet (that well known source of unreliable information) the statement that, if you spend less than 40% of your time in the distant office, you don’t need to worry about whether it’s a “temporary workplace” or not. If things really were as simple as that, those who, in post lockdown times, manage to restrict their visits to no more than 40% (that is, two days of a five day week) would be able to claim what was their previous permanent workplace as a temporary one, and bingo! All of your commuting costs on the two days you do go in would be allowable on this over simplistic interpretation.
What all this fails to take into account is that there is an overarching requirement, for any workplace to be counted as a temporary one, for your attendance there to be for some period of limited duration, or for a temporary purpose only. So in the vanilla situation where a worker was previously getting into a crowded tube train five days a week and now only goes in on Tuesdays and Thursdays, the travel costs are unfortunately still ordinary commuting and therefore non claimable.
However, that still obviously leaves a whole host of non vanilla situations where, perhaps, attendance at your employer’s office could justifiably be claimed as being for a limited duration or for a temporary purpose. And in these situations the fact that you might be preponderantly working at home rather than in any of those offices, could easily be what tips the scale in favour of claiming your travelling costs when you do go in. Read the HMRC Employment Income Manual, which unlike some HMRC manuals is relatively uncontroversial in its stance on most points, for more details in these non vanilla situations.
If You’re Self Employed
It’s when you come to those who are self employed, those who are running a business as sole trader, partnership or LLP, that the real importance of the question of whether your home is your “base” becomes a crucial one. In this situation, you can completely forget all that stuff about temporary and permanent workplaces. The basic rule, insofar as its possible to derive one from the confused mess of case law on the subject, is that travel from your base to other places is claimable. So, in principle, even if you are travelling to another office which is an ancillary location of the business, you should be able to put in a claim. This is where the vagueness much beloved of those who make English law becomes particularly apparent. There’s even the possibility that the work office far away might be one of two bases. It becomes, as so often in this sort of tax question, a matter of impression, or perhaps a matter of degree. It’s not possible to be specific in an article like this because there is no vanilla situation where you can say that on one side of the line the costs are claimable and on the other they aren’t. But at least one can say that, if you have shifted the base of your self employment business firmly to your home, such that there’s no other important base, all of your travelling costs will be claimable against tax.
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