Travel expenses

Travel expenses have specific tests which must be satisfied in order for an employee to gain a deduction. These rules are different from the general rule for deductibility of expenses in that they do not need to be incurred ‘wholly and exclusively’. This is because with any business travel, there are likely to be elements of mixed or private purpose, eg meals taken on a trip or overnight accommodation because the employee needs sleep. Meals and overnight accommodation come under the heading ‘subsistence’ and expenses on subsistence follow the rules on business travel. See the Subsistence expenses guidance note for more information.

As a result of the exemption for expenses that are either business expenses or the reimbursement of HMRC approved amounts, it is incumbent on an employer to keep the necessary processes, systems and controls to ensure that business and non business expenses can be correctly identified and recorded.

In order for a travel expense to be allowable, it must satisfy one of two tests, either:

• •it is ‘necessarily incurred in the performance of duties’ (ITEPA 2003, s 337)
• •the travel is ‘for necessary attendance’ (ITEPA 2003, s 338)

In addition to satisfying one of these tests, the employee must be ‘obliged to incur and pay them as the holder of the employment’ under ITEPA 2003, ss 337(1)(a), 338(1)(a). The test is common to both provisions. Commentary and examples on both elements of this test, that it be ‘incurred and paid’ and ‘obliged as holder of the employment’, can be found in the Business expenses ― general rule guidance note.

HMRC guidance is at EIM32350 onwards.