Do you claim travel expenses? Read on to see if you’re doing it right, or missing out.
If you’re self-employed, chances are you might find yourself having to travel for work and claim travel expenses. What you can and can’t claim for in your tax return can become a bit of a minefield, especially if you’re working from temporary workplaces, like a construction site. Following on from our Business Expenses Guide, we thought we’d expand on travel expenses, helping you to understand exactly what you can claim back for on your Self Assessment tax return.
The first thing to understand is which box your travel belongs in. For example, self-employed or not, if you’re travelling from home to a single permanent workplace, then none of your travel expenses for this commute are admissible. However, if you’re travelling to a temporary workplace, then this is an allowable expense. Keep in mind, the cost of ordinary commuting is not allowed.
Permanent vs Temporary Workplaces
A workplace that is regular, but still temporary becomes a bit of a grey area. For example, if you're working from somewhere continuously (such as a large-scale construction project) for more than 24 months, or it is apparent that you will be, this is considered a permanent workplace. In another example, a field sales person could class an ‘area’ as a permanent place of work. If they live outside of that area and are commuting there for work, then their travel there and back can't be included. However, any business-specific travel within the region can be included in the Self Assessment tax return.
You might find yourself needing to visit a client’s workplace for meetings from time to time. If you travel from your permanent workplace, then the travel expense can be offset against your tax liability. However, journeys to a client’s workplace from your own home can only be included in certain circumstances. HMRC have a variety of rules on this, which your accountant can help you with.
So now you understand when it's OK to claim for travel expenses, we can look at what types of transport, along with the other expenses you can include when on the road.
What Counts as an Expense for Tax Purposes?
Firstly, you can include the travel itself. Keep your receipts for any public transport trips you take, including buses, trains, tubes, taxis etc. For London travel, you can access a breakdown of your Oyster Card usage via Transport for London’s “TFL App”. However, only those journeys that are “wholly and exclusively” for business purposes are valid. Car rental, toll booth charges, congestion charges and parking costs should also be included.
Costs of Travelling
One question we often get asked is whether you have to take the cheapest form of travel. The simple answer here is, "No, you don’t." You can claim for whichever method of transport you use. For example, if you have to travel across London for a meeting, the tube may only cost you £5.90. However, you may choose to take a cab, that could charge £30.00. You can claim the full £30.00, so don't feel you have to expense the smallest amount.
If you’re driving, then you should always be tracking your mileage. At 45p per mile (for the first 10,000 miles) for cars and vans, business mileage expense claims can really add up. Considering the average van drives around 12,000 miles per year, this could mean that £5,000.00 that can be offset against your tax, saving you a lot of money.
Can I Claim for my Sandwich?
When it comes to food, it all depends on where you make the purchase, and whether that purchase is outside of your normal pattern of work. For example, if you’re driving from destination A to a client meeting at destination B for a one off meeting, and you buy a sandwich en route, then you can claim it. However, if you made a sandwich at home from ingredients purchased during your personal shop and took it with you, you couldn’t.
This comes down to working out what’s better for you – Saving money in the short term, or maximising your tax relief in the long run.
If your trip includes an overnight stay, then your hotel and accommodation can be claimed for in your tax return. Again, food and drink purchased while staying in the hotel can be claimed for as part of your Self Assessment; this is known as subsistence.
Travel Expenses for Trips Abroad
So, what happens if your business travel includes an international trip involving the exchange of currency? As exchange rates can fluctuate, knowing how much you can claim for can be difficult. The best bet is keep a close eye on exactly how much money left your business account. If you've paid using cash, take note of the current exchange rate at that time.
If you're travelling abroad for work, you may decide to take your other half with you and enjoy a bit of sightseeing. Be careful though, as HMRC might not see this as “Wholly and exclusively” for business. Any sniff that you’ve had any personal gain from a trip and the business expense could potentially go out the window. If your other half is insistent on joining you, then it’s worth making sure everything gets booked separately. You also won’t be able to come home slightly later to fit in a museum visit – your trip must be exclusive for business purposes.
What to Remember for Claiming Expenses for Tax Purposes
All in all, there are a few take-home points that you need to remember:
- Not all of your journeys can be to claimed against for Self Assessment tax return.
- Keep receipts and notes of your purchases. It may seem time-consuming, but you never know what level of detail you’ll need for proving your case.
- Keep records from your business travel and purchases separate from your personal affairs.
- Keep a detailed log of your mileage. The best way to do this is using an automatic mileage tracking app. IN-SYNC customers can use our very own mileage tracker, LOGIT-IN, which allows you quickly choose between a business or personal journey. With it, you'll be able to provide far more accurate tax returns and claim for every penny possible.
Glossary of Terms
- Ordinary Commuting: Any travel between a permanent workplace and:
- Any other place which is not a workplace
- Permanent Workplace: A place is a permanent workplace if the person attends it regularly for the performance of the duties of the employment and it is not a temporary workplace.
- Temporary Workplace: A place is a temporary workplace if an employee goes there only to perform a task of limited duration or for a temporary purpose even where the employee attends it regularly.
- Wholly and Exclusively: An expense occurred that is 100% linked to business usage. For example, if your mobile phone is for business and personal use, it is not wholly and exclusively.
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