Travel and subsistence review

13 March 2015

The government review on the rules underlying the taxation of travel and subsistence expenses continues and the government has confirmed that further consultation will not commence until later in the year.

The government’s plan was to consult in two stages.

Stage 1

The first stage took place from July to October 2014 to enable the government to improve its understanding of the commercial realities of travel and subsistence payments. Amongst other issues, they explored the circumstances in which employers pay travel and subsistence expenses; how tax influences these decisions; and the other factors which influence commercial decision making in this area.

At this stage of the review the government was not considering the detail of possible rules themselves but instead a framework that would provide parameters within which a new system of travel and subsistence rules could be designed. This stage took the form of discussion groups with stakeholders, drawing out their views on the principles of travel and subsistence payments. The CIPP were involved in these discussions.


Stage 2

The second stage was to establish a working group to assist in producing a new set of principles for a new travel and subsistence tax regime. These principles were to be based upon the government’s findings from the first stage of the review.

 

CIPP comment

The government intended to report on the second stage of the review at Budget 2015 but has confirmed in an update that Stage 1 work is still continuing so they will not be reporting at Budget 2015. However, they have said that should the government decide to proceed with reforming the rules, any proposals will undergo a full consultation and details of this consultation process will be published in due course.

Ernst & Young (EY) were also involved with the Stage 1 stakeholder discussions. At the end of 2014, they conducted a survey of employers to examine how they implement T&S policy within their organisations and to gauge their opinion on the current legislation. Key findings from the survey include:

  • 89% of respondents believe the current T&S rules are in need of a fundamental review.
  • 53% of respondents would not support a change of legislation that only allows tax relief on expenses where the amounts are paid by an employer, with a further 22% not knowing if this should be the case. A majority feel this would be unfair on employees.
  • 70% of respondents stated that the current T&S rules are too complex for employees to understand.
  • 41% of respondents think 24 months is about the right length of time for a worker to spend at a temporary workplace before it is defined as permanent, whilst 35% believe it is too short.
  • 42% of respondents believed a percentage of employee attendances was not the best way to determine whether a permanent workplace exists.
  • 75% of respondents believe expenses paid with regard to homeworkers is an area that requires specific legislative coverage.

Follow this link to read the full EY report