Travel expenses between UK and overseas workplace

Commuting costs are taxable

You’re probably aware that if you pay an employee’s travel costs to or from their normal workplace it counts as private and so is taxable pay or a benefit in kind, depending on how you meet the cost. But special rules apply if their normal workplace is outside the UK.

Exemptions

There are several exemptions which can apply to an employee’s journeys to and from their home when they are working abroad. Each exemption has a slightly different purpose. As a UK employer those you’re most likely to need to know about are:

Starting and ending a job. The first exemption relates to the journeys at the start and end of an employment. For UK employers two conditions must be met for the exemption to apply. Condition A - the duties of the job are performed wholly outside the United Kingdom; and condition B - the employee is a UK resident for tax purposes.

Interim journeys. The second exemption applies in any of the following cases.

Case A is where the work is wholly outside the UK and:

• the employee is absent from the UK wholly and exclusively for work purposes
• the work can only be performed outside the UK; and
• the journey starts in the country where the work is and ends in the UK or vice versa.

Case B applies where the work is partly performed outside the UK and:

• it isn’t work on board a vessel
• the journey starts in the country where the work is and ends in the UK or vice versa
• the work can only be done outside the UK; and
• the journey is made wholly and exclusively for the purpose of the work or returning to the UK after it ends.

Case C is similar to case B, but applies where the work is carried out on board a vessel.

The exemption applies to the cost of travel for the whole journey, i.e. from where the employee is staying abroad and where they are staying in the UK (usually their home), not just the part of the journey between the borders of each country, For example it will cover the train and taxi fares getting to the rail station or airport as well as the flight or ferry fare.

Family visits

A similar exemption is allowed for the cost of travel for visits by an employee’s immediate family (spouse/partner and children under 18). This exemption only applies if the employee is out of the UK for a continuous period of at least 60 days and the family member’s journey starts in the UK and ends in the vicinity of where the employee is, and is:

• to accompany the employee at the start of the overseas work; or
• to visit them while they are required to be abroad for work; and
• is for up to two outward and return journeys per tax year.

Where either of the exceptions apply you can pay for or reimburse an employee their travel expenses tax and NI free. If you don’t meet the cost in full the employee can claim a tax deduction for the shortfall they pay for.